By Natasha Malpani, Founder, Boundless Ventures
2025 will be remembered as the year AI came down to earth. Ambition finally met infrastructure. Hype met hardware. And the story of intelligence became the story of integration. For the first time, the industry stopped talking about how big models were and started asking whether they actually worked.
2025: the year intelligence met reality
The trillion-parameter race ended quietly. Smaller, retrieval-grounded systems like Mistral, Phi-2, Llama-3, and Gemini outperformed massive generic models on real tasks. Scale stopped signalling progress; architecture started doing the heavy lifting.
We entered the era of modular intelligence: world models that simulate, spatialise, and act. AI began to reason about space, causality, and consequence.
Multimodality finally clicked into focus. Models could see, hear, and describe the world- thanks to GPT-4o, Claude-3V, and Gemini- but they still couldn’t understand it. 2025 solved perception; understanding remains unfinished business.
Agents got their reality check too. Most “copilots” were still glorified macros. The few that survived did one simple thing right: they kept receipts. They logged every step, self-critiqued, and rolled back errors. Auditability became oxygen.
Meanwhile, AI infrastructure turned geopolitical. GPUs became bargaining chips. The global stack fractured: U.S. model labs, Chinese fabs, and an India–GCC corridor quietly forming a third axis of sovereign compute.
The cloud stopped being neutral territory; it became a national asset.
And while everyone argued online, physical AI got on with it. Drones, factory arms, and inspection cameras delivered hard ROI. The real revolution was edge inference, intelligence embedded inside machines rather than trapped behind dashboards.
By December, one truth was obvious: “Bigger model” is no longer a business model. 2025 ended the scale race and began the reliability race. The next competition is not for intelligence, it’s for consistency.
2026: The year AI meets the world
2025 proved AI can think in isolation. 2026 will prove whether it can work in motion: inside factories, workflows, cities, and markets.
Persistent memory becomes the new infrastructure. Systems will finally remember across sessions and devices. Context stops being a feature and becomes the foundation. Retention, decay, and privacy turn into competitive advantages.
Multimodality goes causal. Models stop captioning what happened and start predicting what comes next. In logistics, security, healthcare, and media, AI shifts from reactive to predictive: understanding why, not just what.
Edge inference becomes the default setting. NPUs now ship in phones, drones, vehicles, and robots. Latency drops below perception; privacy becomes the product. The cloud’s new job is orchestration—updates, telemetry, safety nets: while the edge becomes the brain.
Agents learn accountability. Every serious deployment includes a reasoning trace, self-testing, and rollback. Autonomy earns trust only when it can explain itself.
Sovereign stacks mature. India–GCC corridors strengthen. Europe locks in data residency. The U.S. tightens export control. Compute capacity becomes the new measure of state power.
Physical AI scales from pilot to fleet. Inspection drones, maintenance robots, and QA agents become a line item in manufacturing budgets. Intelligence is no longer an experiment: it’s a cost of doing business.
Our view
AI’s next act is happening in the real world: where power, latency, and reliability decide who wins.
2025 gave us intelligence that works in theory. 2026 will bring intelligence that works in context.
For founders, that means building systems that remember, learn, and explain: software that compounds rather than resets.
For investors, it means backing teams that integrate AI into physical and industrial workflows, not just chat interfaces.
For policymakers, it means recognising compute as infrastructure, not accessory.
The decade ahead will be defined by how seamlessly they fit into life and work: how well they compound with human behaviour instead of competing with it.
AI is leaving the cloud. It’s meeting the world. And the ones who build for that reality will own the next decade.