1.Hybrid AI: moving beyond experimentation
Hybrid AI refers to the integration of multiple AI methodologies, combining traditional machine learning techniques with advanced neural networks, symbolic reasoning, and human expertise, to create more versatile, adaptive, and accurate systems. This approach allows AI models to perform complex tasks that require both structured data processing and intuitive, human-like decision-making. Notable examples of hybrid AI include Google DeepMind's AlphaFold, which blends deep learning with traditional physics-based models to predict protein folding, which has significant implications for drug discovery and medical research. Another example is Microsoft's Azure AI, which combines reinforcement learning with pre-trained models to optimize business processes.
What to Watch: As an increasing number of businesses implement hybrid AI systems, their complexity and decision-making based on both data-driven algorithms and predefined rules, raise questions about accountability—particularly if the AI makes incorrect or harmful decisions.
Early entrants in this industry may benefit from the current lack of clear legislation surrounding AI in the UK. However, first movers must be prepared to accept the risk of potentially building or relying on systems that are incompatible with future more comprehensive AI regulations (such as the EU AI Act and the EU’s Directive 2001/29/EC (on Copyright and the Digital Single Market)), once these take shape and are enacted. Providers and users must now carefully weigh the advantages of first-mover benefits against the risks of future compliance challenges and unforeseen legal consequences.
2.Ethical AI: driving responsible tech development
As AI systems become more embedded in everyday life, ethical concerns around their design and deployment are growing. Companies, including IBM with its Watson suite, and Microsoft with its Responsible AI Standard, are emphasizing transparency and responsible AI use in their deployments across industries. These efforts reflect the growing focus on ensuring that AI systems are fair, accountable, and transparent.
What to Watch: Regulators are likely to apply ethical AI considerations within future regulation, especially as the UK and EU lead, albeit in varying degrees, in promoting responsible tech. Companies prioritizing fairness, accountability, and transparency in AI development are likely to stand out as industry regulatory standards continue to become more exacting.
3.Climate Tech: addressing sustainability goals
Climate tech solutions, from carbon capture to energy-efficient building materials, are gaining momentum. UK-based Carbon Clean for instance, is pioneering CO₂ capture technology, while AMP Robotics uses AI to improve recycling processes. Both are pushing boundaries in sustainable innovation, taking strides towards addressing climate challenges. These trends are fuelled by the growing focus on sustainable business and combatting climate change, from governments, supranational organisations, and investors.
What to Watch: Investors are increasingly interested in how climate tech companies meet environmental standards and their adherence to the latest ESG requirements, particularly in light of the UK’s target of "net-zero" by 2050. This heightened interest focuses on environmental requirements like carbon footprint reduction, sustainable resource usage, and climate-related risk disclosures, as well as social aspects such as community impact, workplace diversity, and ethical business practices. This focus aligns with global sustainability goals and the COP29 outcomes. As the world prioritizes climate resilience and carbon neutrality, these investments are driving transparent, impact-driven solutions that support a sustainable and low-carbon future.
4.Quantum Computing: entering early commercialisation
Quantum computing is an emergent field of cutting-edge computer science harnessing the unique qualities of quantum mechanics to solve problems beyond the ability of even the most powerful classical computers. Its potential applications are vast, from financial modelling to drug discovery. Rigetti Computing and D-Wave are two companies actively working toward scalable quantum solutions. Though still in its early stages, the field is progressing, particularly in industries requiring complex data analysis and advanced computational power.
What to Watch: Quantum computing’s unique potential has led to increased regulatory attention, particularly for IP and export control. In the EU and UK, quantum computing innovations will be governed by patent regulations under the European Patent Convention (EPC) and UK Patent Act, as well as trade secrets regulation through the EU Trade Secrets Directive and the UK Trade Secrets Regulations among others. However, quantum technologies may also be subject to export controls under the EU Dual-Use Regulation and UK Export Control Regulations, restricting the export of sensitive technologies with military or dual-use applications. For companies developing quantum solutions, securing early IP rights and obtaining export control advice will be essential for long-term growth and competitive advantage.
5.Digital Identity and decentralized finance ("DeFi"): redefining security and finance
Blockchain-based digital identity platforms are creating more secure, decentralized ways to verify and control personal data. Examples include Civic, which offers distributed ledger digital ID solutions, and Compound, a leader in DeFi that enables secure, decentralized lending and borrowing.
What to Watch: DeFi and digital identity ventures are grappling with complex anti-money laundering and ‘know your customer’ due diligence requirements. Companies that can maintain robust compliance while offering user-friendly solutions may gain an edge in a fast-evolving space.
6.Cybersecurity: responding to rising threats
Cybersecurity is set to remain a top priority in 2025, with threats escalating in both volume and sophistication. Palo Alto Networks and SentinelOne are notable examples of cybersecurity providers, each offering AI-driven security platforms that help companies detect and respond to cyber threats across Cloud and on-premise infrastructure.
What to Watch: Cybersecurity standards are evolving as a result of regulatory developments, especially in the UK and EU, with a push towards a demand for higher levels of data resilience. Key legal considerations in this area include the rise of EU regulations such as the Digital Operational Resilience Act (DORA), and the updated EU Network and Information Security Directive (NIS2). Providers in this field must prioritize compliance and risk management to mitigate regulatory exposure. In addition, any organisation handling sensitive financial/asset data may be considered critical national infrastructure under the recently passed legislation, and will need to plan its cyber resilience and procurement pipeline very carefully with a focus on the state of the art.
7.Health Tech: revolutionizing patient care and diagnostics
Health tech innovations are reshaping diagnostics, telemedicine, and personalized care. Tempus, for instance, uses AI to provide cancer treatment insights, while Babylon Health delivers virtual healthcare consultations, improving access to quality medical advice.
What to Watch: Health tech firms must navigate rigorous data privacy and IP regulations, particularly under EU’s GDPR, which includes health data in special categories requiring heightened protection. Users of health tech solutions must stay compliant with evolving regulations, ensuring both legal protection and patient trust. For investors, understanding compliance standards will be critical as health data management and privacy become even more central to this field.
IP protection is also crucial, with European Patent Convention (EPC) and UK Patents Act covering patents for medical devices, AI algorithms, and software innovations. Trade secrets protection and copyright laws also play a role in safeguarding proprietary technologies.
8.Supply Chain Innovation: enhancing efficiency and transparency
Recent supply chain challenges have spotlighted the need for improved logistics technology. Flexport offers digital freight-forwarding services, providing end-to-end visibility and data-driven insights for shippers. FourKites is another example, using AI to enable real-time shipment tracking and predictive analytics.
What to Watch: Supply chain tech investments involve managing data across borders and understanding trade compliance. Ensuring data localization and meeting international standards will be essential for long-term success and operational security.
9.Edge Computing: powering real-time applications
Edge computing is transforming industries by allowing data to be processed closer to its source —at the "edge" of the network— reducing latency, increasing operating speed, and improving efficiency by minimising the need to transmit large volumes of data to centralized data centres. Nvidia’s edge computing solutions, designed to support AI applications in real-time data processing, are used across sectors from autonomous vehicles to healthcare diagnostics.
What to Watch: Edge computing requires strict attention to data privacy and security obligations, especially with GDPR regulations in the EEA and UK. This is because the decentralised nature of edge computing leads to more endpoints being vulnerable to cyber attacks and harder to secure, as well as the limited computational power of edge devices restricting the implementation of robust security measures. Companies operating in this space should prioritize secure data practices and compliance with local and regional standards.
10.Employee Experience Tech: supporting the hybrid workforce
The rise of hybrid work has boosted demand for technology that enhances employee engagement and productivity. Microsoft Teams and Zoom are well-known examples, constantly evolving to support collaboration and communication for distributed teams. Startups like BetterUp are also gaining attention with digital platforms that support employee wellness and professional growth.
What to Watch: Data privacy is crucial when handling employee information, especially under stringent protections in the EU and UK. Companies should implement robust data security protocols to address the unique challenges that come with managing employee data in a hybrid work environment. Furthermore, securing the right telemetry, hosting architecture and managed services is an essential element to employee-experience technology. As such, companies must take care to ensure that systems and agreements are in place to ensure a seamless hosting experience.
Final thoughts
2025 is set to be an impactful year across these technology trends, bringing fresh opportunities and challenges to the forefront. For companies and investors in these fields, the ability to anticipate regulatory changes and adapt to evolving market demands will be critical for navigating this dynamic landscape. With technological advances reshaping industries and influencing investment strategies, staying attuned to both innovation and regulation will be essential for sustainable growth in the coming years.
There are just as many considerations for the potential customers of these emerging technologies as often, first mover advantage involves taking legal and commercial risks that may be reduced or mitigated for buyers in more developed markets. For more information on the state of the art, please get in touch.
DWF has a market leading venture and growth capital practice in the UK, supporting investors and companies across several sectors including financial services, technology, media and telecommunications, life sciences and healthcare and real estate and infrastructure. If you have queries on any of the issues covered in this article please contact one of our experts: Dhruv Chhatralia BEM, James Bryce, Caroline Colliston (as the tax representative for the corporate articles),Ben McLeod, Sam Hodgson, Darren Ormsby, Gemma Gallagher, Gary MacDonald, Paul Pignatelli, Scott Kennedy, Will Munday, Alex Stoughton, Francesca Kinsella, Graham Tait and Rosie Spencer.
With thanks to Gabriella Rasiah and Sam Hodgson
