Artificial intelligence has reached an unprecedented milestone in European venture funding, claiming more than half of all capital deployed in the first quarter of 2026. European VCs poured $17.6 billion into startups during Q1—a 30% year-over-year increase and the second consecutive quarter of growth—with AI commanding roughly $8.8 billion of that total. Yet this capital concentration masks a troubling trend: overall deal volume has collapsed sharply, suggesting VCs are abandoning early-stage diversification in favor of betting heavily on proven AI opportunities. The pattern reflects investor risk aversion and a fundamental shift in how venture capital allocates resources, potentially locking out founders in non-AI sectors regardless of merit.