Israel’s tech paradox: $1.1 billion raised in a week as layoffs sweep the industry
Investors pour money into AI, cybersecurity and infrastructure startups even as thousands of tech workers face restructuring and job cuts.
For anyone trying to gauge the health of Israel’s technology sector, the past week offered two seemingly contradictory answers.
On one side stood investors, who poured more than $1.1 billion into Israeli startups in a matter of days. The funding rounds stretched across cybersecurity, artificial intelligence, networking infrastructure, insurance technology and defense-related robotics, producing one of the strongest fundraising weeks the industry has seen this year.
On the other side stood employees. Across the sector, companies announced layoffs, restructurings and cost-cutting programs, with many explicitly linking the changes to artificial intelligence and the need to operate more efficiently in a rapidly evolving market.
The result is a portrait of an industry that remains highly attractive to investors while simultaneously becoming more selective about the human workforce required to build its future.
The largest deal of the week belonged to DriveNets, which raised $410 million at a valuation of $8.5 billion as demand for AI-related networking infrastructure accelerates. Data security company Cyera followed with a $300 million round at a $12 billion valuation, only five months after raising $400 million at a $9 billion valuation.
Observability company Coralogix added another $200 million at a $1.6 billion valuation, arguing that artificial intelligence is generating more data rather than reducing the need for monitoring tools. AI cooling startup ZutaCore secured $100 million from investors including Samsung, Mitsubishi Electric and Carrier. Additional rounds included $40 million for digital insurance company Honeycomb, $39 million for Centrical, $10.2 million for autonomous robotics startup Shifters, and seed financings for Willow and Offroad, two startups focused on managing risks created by the growing use of AI agents.
Taken together, the fundraising spree crossed the $1.1 billion mark in less than a week.
The common thread connecting nearly every deal was artificial intelligence.
Some companies are building infrastructure required to power AI systems. Others are developing security products to protect them, cooling technologies to support the data centers running them, or governance tools designed to control the growing number of autonomous agents entering corporate environments.
Investors appear increasingly convinced that AI is not simply another software category but a foundational technological shift requiring entirely new layers of infrastructure, security and operational controls.
Yet the same trend fueling investment is also driving layoffs.
Over the past two weeks alone, a series of Israeli and Israel-linked technology companies announced workforce reductions or restructuring plans. Wix said it would cut 1,000 jobs, roughly one-fifth of its workforce, in the largest layoff round in its history. Skai laid off about 100 employees, or 20% of its workforce, citing changes driven by artificial intelligence. Lightricks announced another round of cuts as it reorganizes around AI. Rapyd began layoffs as part of what its CEO described as the creation of a unified AI-driven organization.
Other companies pursuing workforce reductions include BigID, Minute Media, Amdocs, SentinelOne, PayPal’s Israeli operations and cultivated-meat company Aleph Farms.
The layoffs vary in size and motivation, but together they point to a broader shift underway across the technology industry. Companies are increasingly attempting to redirect resources toward AI initiatives while reducing costs in areas viewed as less essential to future growth.
The contrast between soaring investment and shrinking payrolls highlights how the economics of the sector are changing. Unlike previous technology booms, the AI era is not necessarily producing proportional increases in hiring. In many cases, companies argue that AI tools enable existing employees to accomplish more, reducing the need for larger teams even as revenues and valuations grow.
At the same time, those workers who remain in demand are becoming increasingly expensive.
Data published on Thursday by the Central Bureau of Statistics showed that the average salary in Israel’s high-tech sector reached a record NIS 38,467 ($13,310) in March, up 4.3% from a year earlier. Salaries in programming climbed even higher, reaching NIS 40,117 ($13,881). Despite concerns about layoffs, employment in the sector remained broadly stable at 396,000 salaried positions, unchanged from a year earlier.
The figures suggest that while companies may be hiring fewer people overall, competition for highly skilled engineers and AI specialists remains intense.
This creates a growing divide inside the industry. Capital continues to flow toward companies viewed as leaders in AI, cybersecurity and digital infrastructure. Valuations continue to rise. Salaries continue to break records. Yet many businesses are simultaneously reducing headcount and redesigning organizational structures around the assumption that AI will perform a growing share of tasks previously carried out by people.
The week’s events offered a glimpse of what Israel’s technology sector may increasingly look like in the years ahead: more capital-intensive, more AI-centric, more productive, and potentially employing fewer people than previous growth cycles would have required.
