Generative AI funding will peak in 2024

If there was any doubt, the AI ​​bubble will not burst in 2024.

Investments in AI, which includes a variety of AI-powered software, tools, and services for producing text, images, videos, speech, music, and more, peaked last year. According to financial tracker PitchBook’s data from TechCrunch, AI companies around the world raised $56 billion from VCs in 2024 at 885 deals.

All funds raised are new records for the sector. It is up 192% from 2023, while investors poured out $29.1 billion in AI startups across 691 projects.

“We don’t see a slowdown in AI investment, as big names like OpenAI, Anthropic, and xAI continue to raise funds and produce new, competitive innovations,” said Ali Javaheri, technology analyst at PitchBook, in an interview. .

Deal value in Q4 2024 rose to $31.1 billion with the closing of mammoth rounds like Databricks’ $10 trillion Series J, xAI’s $6 billion Series C, Anthropic’s $4 billion in funding from Amazonand OpenAI is a $6.6 billion round.

Mergers and acquisitions accounted for the smallest share of AI investment in 2024: $951 million, according to PitchBook data. To be clear, this is different from the “acqui-hire” deals done by Google, Microsoft, and Amazon. Google he says paid $2.7 billion to sign up many chatbot startups Character AIemployees and licensing of its technology, where Microsoft is he said spent $650 million to license FlexibilityAI brands is hiring CEO, Mustafa Suleyman.

US companies attracted increasing support for AI last year. Startups outside the US accounted for only $6.2 billion of all 2024 VC investment in the market. There were some very successful ones, however, such as the Beijing-based one Moonshot AI ($1 billion in February), launching in France Mistral (~ $ 640 million in June), a Cologne company DeepL ($300 million in May), a Shanghainese company MiniMax ($600 million in March), and Tokyo-based Sakana AI (~$214 million in September).

So what might 2025 hold?

Javaheri believes that the creative field of AI runs the risk of being flooded with similar (or similar) startups. In his place, at least four companies creating AI code assistants – Add it, Magical, What?and Poolside – closed more than $100 million in sales last year. And many media production basics (eg, Black Forest Labs, ElevenLabs) has recently made a multi-million dollar investment in the discovery of precious metals.

This trend may not be sustainable as the pressure on businesses to disclose their income increases.

According to Javaheri, technical difficulties and the large amount of computing capital required to remain competitive may pose additional challenges for AI-based businesses. “Only high-income startups can keep up with the speed required of modern models,” he added. “A lot of value comes from architecture.”

This is the best news for the players of the “infrastructure layer” of AI developers, who created themselves in 2024. Crusoe ($600 million in December) and Lambda ($320 million in February) represented the largest lines in the AI ​​market.

Opinions of the company KKR they predict that the growing demand for data centers to support AI will increase global spending to $250 billion annually.

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