Finnish startup NestAI just closed a €100 million funding round led by Nokia and Finland's sovereign fund Tesi, marking one of Europe's largest defense AI investments this year. The deal positions NestAI to build what co-founder Peter Sarlin calls "Europe's leading physical AI lab" at a time when the continent is scrambling to develop homegrown defense technologies amid the ongoing Ukraine-Russia conflict.
NestAI just became one of Europe's best-funded defense AI startups, pulling in €100 million from an unlikely alliance of corporate and sovereign money. The Finnish company's funding round, led by hardware giant Nokia and Finland's state investment fund Tesi, signals how seriously European governments are taking the race for defense AI supremacy.
The timing isn't coincidental. As the Ukraine-Russia war drags into its third year, European nations are pouring money into homegrown defense technologies to reduce dependence on American suppliers. NestAI is betting it can capture this moment with what it calls "physical AI" - essentially large language models that can control real-world military hardware like drones, autonomous vehicles, and command systems.
"In line with PostScriptum's mission, NestAI has from the start set out to become Europe's leading physical AI lab to drive technological sovereignty," co-founder Peter Sarlin told TechCrunch. The partnership "marks an important step in securing Europe's defense capabilities and sovereignty."
Sarlin knows a thing or two about building AI companies that attract big exits. He previously founded Silo AI, which AMD acquired for $665 million last year. Now he's funding NestAI through his family office PostScriptum while keeping his day job at AMD. He'll serve as chairman rather than CEO, though the company hasn't named a chief executive yet.
The Nokia partnership goes beyond just funding. The Finnish telecom giant will work with NestAI to develop AI products specifically for defense applications, leveraging Nokia's hardware expertise and NestAI's AI capabilities. It's a strategic marriage that could help both companies compete against American defense contractors like Palantir and Anduril, which have dominated the AI-powered defense market.
Physical AI represents the next frontier beyond traditional chatbots and language models. Instead of just processing text, these systems need to understand and manipulate the physical world through robotics, sensors, and autonomous systems. The technology is particularly valuable for military applications where human operators can't safely deploy.
NestAI has already begun working with the Finnish Defense Forces to help them adopt AI technologies, according to an October announcement. The company emerged from stealth mode at Helsinki's Slush 2025 technology conference, where Sarlin revealed the funding and partnership details.
The startup's team reads like a who's who of European defense and AI talent. A significant portion of the staff previously worked at Intel, while others come from defense contractors like Kongsberg, Palantir, and Swedish aerospace company Saab. This blend of semiconductor and defense experience positions NestAI to bridge the gap between cutting-edge AI research and practical military applications.
European governments have been pushing for greater defense technology independence since Russia's invasion of Ukraine exposed the continent's reliance on American and other foreign suppliers. The European Union recently launched its own defense innovation program, while countries like Germany and France have increased defense spending and domestic technology investments.
NestAI's €100 million round puts it in competition with well-funded American companies like Anduril, which recently raised $1.5 billion, and Shield AI, which has raised over $500 million. But the European company may have an advantage in winning government contracts from EU nations that prefer domestic suppliers for sensitive defense technologies.
The physical AI market is heating up across multiple sectors. Companies like Boston Dynamics, Agility Robotics, and Figure AI are racing to build general-purpose robots, while others focus on specific applications like autonomous vehicles or industrial automation. Defense applications represent one of the most lucrative segments, with governments willing to pay premium prices for advanced capabilities.
Nokia's involvement adds credibility and scale to NestAI's ambitions. The Finnish company has been trying to diversify beyond traditional telecom equipment into higher-growth areas like enterprise software and industrial IoT. Defense AI could provide Nokia with a new revenue stream while leveraging its existing relationships with European governments and military contractors.
NestAI's massive funding round reflects Europe's urgent push to develop sovereign defense technologies as geopolitical tensions reshape global supply chains. With Nokia's backing and a team of seasoned defense-tech veterans, the Finnish startup is positioned to challenge American dominance in military AI applications. The real test will be whether NestAI can translate its impressive funding into actual products that European governments want to buy - and whether physical AI can live up to its ambitious promises on real battlefields.
