On May 28, Cathay Innovation, through Cathay Capital, announced the final closing of its third fund—Fund III—with $1 billion in capital. This fund is specifically dedicated to supporting startups developing vertical artificial intelligence solutions targeting critical sectors such as healthcare, manufacturing, and finance. This initiative reflects a strategic shift in the global technology landscape: a move toward specialized, business-oriented AI with high operational value.
\n\n\n\nVertical artificial intelligence, also known as domain-specific AI, is distinguished by its ability to address specific use cases using models trained on contextual data. Given the relative inefficiency of general-purpose AI in industrial or medical settings, this specialization appears to be a natural evolution.
\n\n\n\nCathay Innovation aims to support startups and scale-ups that develop AI-native solutions integrated into sector-specific value chains. The targeted sectors include, in particular:
\n\n\n\nCathay Innovation positions itself as a global player, while emphasizing Europe as a hub for responsible innovation. The fund’s team highlights the opportunity for European companies to adopt sovereign solutions in highly sensitive sectors. To this end, the fund works closely with French, German, and Scandinavian technology clusters.
\n\n\n\nAmong the first recipients announced are several European startups specializing in AI for intensive care, industrial cybersecurity, and supply chain optimization.
\n\n\n\nThe fund’s focus on vertical integration is already yielding measurable results. Among the concrete examples supported or targeted by the fund:
\n\n\n\nAccording to McKinsey, specialized AI can deliver an ROI up to three times higher than that of general-purpose AI initiatives, largely due to better integration with business processes.
\n\n\n\nThe rise of vertical AI raises a key question: how can we ensure its reliability, transparency, and regulatory compliance? Cathay Innovation states that it incorporates strict requirements regarding ethics and data governance into its investment criteria.
\n\n\n\nEach funded startup must demonstrate:
\n\n\n\nRather than a hindrance, this requirement is presented as a competitive advantage, particularly in sensitive sectors where trust is a prerequisite for adoption.
\n\n\n\nThe launch of this fund is part of a broader trend: the industrialization of AI. As companies seek to move beyond the experimental phase, investing in vertical solutions offers a clear path to creating tangible value.
\n\n\n\nCathay Innovation’s initiative illustrates a paradigm shift: AI is no longer an emerging technology, but a key driver of industrial competitiveness. This sends a strong signal to both public and private stakeholders, who are called upon to support a robust, sovereign, and responsible European AI ecosystem.
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