Record-Breaking Investments in 2024
If there was any doubt, the generative AI bubble did not burst in 2024. According to data from financial tracker PitchBook compiled for TechCrunch, generative AI companies worldwide raised $56 billion from VCs in 2024 across 885 deals. This raw cash total is a new record for the segment.
A 192% Increase from 2023
The investments in generative AI have seen a significant surge, with a 192% increase from 2023. In 2023, investors poured $29.1 billion into generative AI startups across 691 deals.
Big Names Continue to Secure Major Raises
"We aren’t seeing a slowdown in generative AI funding," said Ali Javaheri, an emerging technology analyst at PitchBook, in an interview. "Big names like OpenAI, Anthropic, and xAI continue to secure major raises and release new, competitive products."
Q4 2024 Deal Value Soars
Deal value in Q4 2024 soared to $31.1 billion with the closure of mammoth rounds like Databricks’ $10 billion Series J, xAI’s $6 billion Series C, Anthropic’s $4 billion strategic investment from Amazon, and OpenAI’s $6.6 billion round.
Mergers and Acquisitions: A Small Share of Generative AI Investments
Mergers and acquisitions were a small share of generative AI investments in 2024, with $951 million, per PitchBook data. This is exclusive of the various ‘acqui-hire’ deals executed by Google, Microsoft, and Amazon.
- Google reportedly paid $2.7 billion to hire much of chatbot startup Character AI’s staff and license its technology.
- Microsoft is said to have spent $650 million licensing Inflection’s AI models and hiring its CEO, Mustafa Suleyman.
U.S. Companies Attract the Bulk of Generative AI Backing
U.S. companies attracted the bulk of generative AI backing last year, with startups outside the U.S. nabbing just $6.2 billion of all 2024 VC investments in the market.
Big Winners Outside the U.S.
There were some big winners, however, like Beijing-based Moonshot AI ($1 billion in February), French startup Mistral (~$640 million in June), Cologne-based company DeepL ($300 million in May), Shanghainese firm MiniMax ($600 million in March), and Tokyo-based Sakana AI (~$214 million in September).
What Might 2025 Hold?
Javaheri believes that the generative AI sector risks becoming oversaturated with startups in exceedingly similar (or even identical) verticals. To his point, no fewer than four companies developing AI coding assistants saw major investments last year.
The Risks of Oversaturation
The risks of oversaturation are real, and it’s essential for investors to carefully consider the potential consequences before making a decision. With so many startups vying for attention, it can be challenging to stand out in the crowd.
Investors Must Be Careful
As the generative AI market continues to grow, investors must be careful not to get caught up in the hype. It’s essential to carefully evaluate each investment opportunity and consider the potential risks and rewards before making a decision.
Conclusion
The generative AI bubble continues to grow, with record-breaking investments in 2024. As the market continues to evolve, it’s essential for investors to be careful and consider the potential consequences of oversaturation. By being mindful of these risks, we can ensure that the generative AI sector continues to thrive.
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