Funding for generative AI will reach new heights in 2024
If there was any doubt, the generative AI bubble will not burst in 2024.
Investments in generative AI, which includes a range of AI-powered apps, tools and services to create text, images, videos, speech, music and more, reached new heights in the past year. According to data from financial tracker PitchBook collected for TechCrunch, generative AI companies around the world raised $56 billion from venture capital funds in 2024 across 885 deals.
The raw cash total is a new record for the sector. It’s up 192% from 2023, according to investors Poured $29.1 billion in AI startups across 691 deals.
“We are not seeing a slowdown in production AI funding, as big names like OpenAI, Anthropic, and xAI continue to secure significant raises and release new, competitive products,” Ali Jawahery, an emerging technology analyst at PitchBook, said in an interview. .
Deal value in the fourth quarter of 2024 rose to $31.1 billion with the closing of mega rounds such as Databricks’ $10 billion Series J, xAI’s $6 billion Series C, Anthropic’s $4 billion strategic investment from Amazonand OpenAI $6.6 billion round.
Mergers and acquisitions accounted for a small share of AI investments generated in 2024: $951 million, according to PitchBook data. To be clear, this does not include the various “acquire and lease” deals undertaken by Google, Microsoft and Amazon. Google It is said It paid $2.7 billion to recruit a lot of chatbot startups Artificial intelligence characterIts employees and license its technology, while Microsoft does He said To spend $650 million on licensing flexionArtificial intelligence models and hiring its CEO, Mustafa Suleiman.
US companies attracted the bulk of AI support last year. Startups outside the US accounted for just $6.2 billion of total 2024 venture capital investment in the market. However, there have been some big winners, such as Beijing-based companies Moonshot AI ($1 billion in February), a French startup Mistral (~$640 million in June), a Cologne-based company Deep L ($300 million in May), Shanghai company Mini Max ($600 million in March), and Tokyo-based Sakana AI ($214 million in September).
So, what might 2025 hold?
Jawahery believes that the generative AI sector is in danger of becoming saturated with startups in very similar (or even identical) sectors. To his point of view, At least four companies Developing AI coding assistants – more, charm, Codeiumand Next to the pool – Closed rounds exceeded $100 million last year. and a host of media startups (e.g., Black Forest Laboratories, Eleven laboratories) recently secured tens of millions of dollars in funding at very high valuations.
This trend may not be sustainable given investor pressure to show significant increases in revenue growth.
According to what Al-Jawahiri said. Technical challenges The enormous computing costs needed to stay competitive may pose additional challenges for generative AI projects. “Only the best-funded startups can continue to keep up with the pace required for the most innovative models,” he added. “So most of the higher valuations will come from the infrastructure layer.”
This is, of course, very good news for infrastructure layer AI players, who have done well for themselves in 2024. Data center startups like Crusoe ($600 million in December) and Lambda ($320 million in February) represent some of the largest rounds in the generative AI market.
Investment company KKR He predicts The growing demand for data centers to support artificial intelligence will boost global spending in this sector to $250 billion annually.
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