Artificial intelligence (AI) continues to dominate the tech investment landscape, with Al startups raising a staggering $110 billion in 2024, a 62% surge from the previous year, according to analytics firm Dealroom.
This surge comes even as overall startup funding in the broader tech sector declined by 12%, totaling $227 billion. The significant increase in investment this year comes as Generative AI startups and other companies developing AI solutions raised almost $50 billion in 2023, according to Crunchbase.
Al’s influence now spans multiple domains, from hardware and data infrastructure to foundational models and applications. Major beneficiaries of this investment boom include Anthropic (Generative Al) Waymo (self-driving technology), Anduril (defense), ×Al (applications), Databricks (Al data management), and Vantage (data centers and infrastructure). Notably, while OpenAl remains a dominant force in the industry, it raised $6.6 billion less than Databricks, which secured $10 billion.
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The report revealed that the increasing demand for AI technology is fueling two major categories of investment, which are Generative AI and Foundational AI. In 2024, GenAI startups alone raised $47.4 billion, with foundational AI overtaking AI applications in terms of funding growth. Leading the charge are generative Al firms, securing multi-billion-dollar rounds as they refine large language models (LLMs), Al copilots, and advanced image and video generation tools. Additionally, Al infrastructure startups focused on chips, cloud optimization, and model training are attracting major backing from investors looking to capitalize on the technology’s rapid expansion.
In terms of regions that attracted the highest funding, U.S.-based AI startups received the lion’s share of global VC funding, securing 42% ($80.7 billion) of total AI investment. Europe captured 25% ($12.8 billion), while the rest of the world accounted for 18%. China saw significant investment activity, raising $7.6 billion in Al funding last year. One emerging trend is the push toward open-source Al, which some believe could offer a cost-effective alternative to proprietary models. Open-source AI startups received 12% of total AI funding in 2024.
Key Notable Deals in 2024
Several high-profile funding rounds that defined the AI investment landscape in 2024;
OpenAI: OpenAI closed its long-awaited funding round after it announced the raise of $6.6 billion at a $157 billion post-money valuation led by Thrive Capital.
Mistral AI: The French Artificial Intelligence startup announced a new multiyear partnership with Microsoft that valued it at €2 billion (about $2.1 billion).
Nvidia-backed AI chip startups: This includes companies focused on alternative architectures to GPUs, which collectively raised over $10 billion.
Investment in Al startups continues to surge, as companies race to develop cutting-edge models, infrastructure, and applications. Compared to the amount raised in 2023, this year’s funding, reflects heightened confidence in Al’s transformative potential. Corporate investors and venture capital firms such as Sequoia Capital, Andreessen Horowitz, and SoftBank have reportedly intensified their Al-focused investments, betting big on both established players and emerging challengers.
Due to the capital-intensive nature of Al development, startups are linking up with big tech companies like Google, Microsoft, Amazon, and Nvidia to access their cloud infrastructure, chips, and dollars. Notably, tech giants are also doubling down on their massive AI spending as they project tens of billions of dollars in increased investment this year.
With Al’s investment at an all-time high, the focus now shifts to execution and scalability. Investors will be watching closely to see which startups can turn massive funding rounds into sustainable, profitable businesses. As the competition intensifies, 2024 is shaping up to be a defining year for the future of Al.