Medtech investment and IPOs on the rise amid growing AI-driven innovation

In recent months medtech companies have seen an uptick in initial public offering activity, with 2025 IPOs on U.S. exchanges potentially topping the combined totals for 2023 and 2024 and private equity investment reaching a postpandemic high. While the medtech sector still faces many challenges—including capital constraints, tariffs and regulatory uncertainty—companies that leverage technology, especially artificial intelligence and machine learning, are poised to succeed.

Deal value on the rise

Investment in U.S. medtech companies grew in 2025, driven primarily by higher-value private equity deals. Although the number of deals continued to decline from postpandemic highs, individual deal values increased. If interest rates remain high, we expect medtech investment to continue to concentrate on larger but fewer deals.

Several trends in venture capital and private equity investment have emerged:

• Companies with at least 10 approved patents commanded deal values more than eight times higher than those with no patents, even though patent-free firms still made up the majority of VC/PE deals in 2025.
• Medtech firms generating even minimal revenue achieved deal values over six times greater than their pre-revenue counterparts.
• Medtech companies employing 10 to 49 people raised, on average, almost four times more capital than those with fewer than 10 employees.
   

Overall, while VC deals are still plentiful for small medtech companies with no patented devices, few employees and no revenue, companies that can scale and demonstrate technological or financial success will be able to capitalize on a growing appetite for investment in the sector.

Certain device types leveraging technology are poised for success

VC investment has increased in specific device sectors, including radiology and neurology, where AI and machine learning are used. Radiology-focused device companies have seen VC spend triple over the past three years. In addition, according to PitchBook, almost 20% of 2025 VC investment in medtech targeted companies focused on neurology, compared to less than 10% in 2022 and prior years.

Radiology continues to lead medtech in technological innovation. One of the first AI-enabled devices approved by the U.S. Food and Drug Administration (in 1998) was a radiological tool designed to identify and mark regions of interest on routine screening mammograms. As the quality and accessibility of AI and ML have increased over the past few years, capital has flowed to companies developing innovative devices to improve patient outcomes. The FDA approved the first AI/ML-enabled neurological device in 2014, and since then, has cleared 56 such devices.

While cardiovascular is still the category of medical devices—AI-enabled or not—with the largest percentage of approvals, radiology and neurological devices have slowly increased. Nearly 1 in 10 approved devices in the U.S. in 2025 were radiology devices and 1 in 13 were neurological devices.

AI-enabled devices will remain important in the global medtech environment as many advanced economies face shortages of health care personnel, rising health care costs and aging populations. As consumers seek treatment outside of traditional health care, devices that support proactive care, minimize health care costs and waiting times, and improve patient outcomes will be increasingly desirable.

Medtech capital market trends show desire for technology-focused innovation

In the public markets, 2025 saw a dramatic increase in medtech IPOs, with a total of seven through October 2025, according to Bloomberg, the highest since 2022. Four were from companies that focus on diagnostics, monitoring and chronic disease management, a signal that investors may favor companies with scalable, tech-enabled platforms. In 2025, over 70% of medtech IPOs were from companies that utilize AI or ML to deliver better outcomes, compared to less than 50% over the past few years.

The takeaway

The number of AI-enabled devices approved by the FDA in 2025 is projected to be higher than ever. Companies able to successfully leverage technology to drive and differentiate their products in a crowded market will be able to thrive, especially those developing devices used in radiology and neurology settings.

When leveraging AI solutions, however, companies should evaluate any risks associated with deployment and usage, from device security to AI governance. While the use of AI is not new in the medtech sector, new regulations and evolving technologies add complexity to an ever-changing environment.