If there is any doubt, the generative AI bubble will not burst in 2024. Investments in generative AI, which includes various applications, tools and services powered by AI to generate text, images, videos, speech, music, etc., reach a new high last year. According to data from financial tracker PitchBook compiled for TechCrunch, generative AI companies worldwide will raise $56 billion from VCs in 2024 in 885 transactions. The amount of raw cash is a new record for the segment. That’s up 192% from 2023, when investors poured $29.1 billion into generative AI startups in 691 deals. “We don’t see a slowdown in generative AI funding, as big names like OpenAI, Anthropic, and xAI continue to secure big raises and release competitive new products,” said Ali Javaheri, emerging technology analyst at PitchBook, in an interview. . The deal value in Q4 2024 increased to $31.1 billion with the closing of giant rounds like Databricks $10 billion Series J, xAI $6 billion Series C, Anthropic $4 billion strategic investment from Amazon, and OpenAI $6.6 billion round. Mergers and acquisitions are a small part of generative AI investment in 2024: $951 million, according to PitchBook data. To be clear, it is exclusive of the various “acqui-hire” deals made by Google, Microsoft, and Amazon. Google reportedly paid $2.7 billion to hire most of Chatbot Startup Character AI’s staff and license the technology, while Microsoft is said to have spent $650 million to license the AI Inflection model and hire its CEO, Mustafa Suleyman. US companies attracted a lot of support for generative AI last year. Startups outside the US will get $6.2 billion of all 2024 VC investments in the market. However, there are some big winners, such as Beijing-based Moonshot AI ($1 billion in February), French startup Mistral (~$640 million in June), Cologne-based company DeepL ($300 million in May), Shanghai company MiniMax ( $600 million in March), and Tokyo-based Sakana AI (~$214 million in September). So what can we do in 2025? Javaheri believes that the generative AI sector risks becoming oversaturated with startups in almost the same (or even the same) vertical. To that point, no less than four companies developing AI coding assistants – Augment, Magic, Codeium, and Poolside – closed rounds exceeding $100 million last year. And many generative media startups (e.g., Black Forest Labs, ElevenLabs) have recently received tens of millions of dollars in funding at very high valuations. The trend may not be sustainable due to investor pressure to show sufficient revenue growth. According to Javaheri, the technical challenges and computational costs required to remain competitive may be additional challenges for generative AI efforts. “Only the best-funded startups can keep up with the pace required for the most innovative models,” he said. “Most of the high valuations will come from the infrastructure layer.” That, of course, is very good news for the generative AI players “infrastructure layer”, which is good enough for itself in 2024. Data center startups like Crusoe ($600 million in December) and Lambda ($320 million in February) represent some of the most rounds large generative AI market. Investment firm KKR predicts that rising demand for data centers to support AI will increase global spending in the sector to $250 billion annually. TechCrunch has an AI-focused newsletter! Sign up here to get it in your inbox every Wednesday.
