Generative AI Funding Soars to Record $56 Billion in 2024

Venture capital investments in generative AI reached unprecedented levels in 2024, with global startups raising $56 billion across 885 deals, TechCrunch reports, citing data from financial tracker PitchBook.

This figure represents a record for the sector, marking a 192% increase from the $29.1 billion raised across 691 deals in 2023. Generative AI encompasses a wide range of AI-powered applications, tools, and services that create text, images, videos, speech, music, and other forms of media.

"We aren’t seeing a slowdown in generative AI funding, as big names like OpenAI, Anthropic, and xAI continue to secure major raises and release new, competitive products," stated Ali Javaheri, an emerging technology analyst at PitchBook, in an interview with TechCrunch.

The fourth quarter of 2024 witnessed a surge in deal value to $31.1 billion, driven by large funding rounds secured by companies such as Databricks ($10 billion), xAI ($6 billion), Anthropic ($4 billion), and OpenAI ($6.6 billion). Mergers and acquisitions, on the other hand, represented a smaller portion of generative AI investments, totaling $951 million. The report points out that this number excludes "acqui-hire" deals such as Google's payment of $2.7 billion to hire Character AI's staff and Microsoft's $650 million to license Inflection AI technology and hire its CEO.

U.S.-based companies attracted the majority of generative AI funding in 2024, with startups outside the US capturing only $6.2 billion in VC investment. However, a handful of international startups also secured significant funding, including Beijing-based Moonshot AI ($1 billion), French startup Mistral (~$640 million), Cologne-based DeepL ($300 million), Shanghai-based MiniMax ($600 million), and Tokyo-based Sakana AI (~$214 million).

Looking ahead to 2025, Javaheri anticipates a potential over saturation of AI startups in similar or even identical verticals, citing the existence of at least four AI coding assistant companies that raised over $100 million each last year as an example. Furthermore, the vast compute power needed to remain competitive coupled with technical challenges, could present further difficulties for some generative AI companies.

"Only the best-funded startups can continue to keep up with the pace needed for the most innovative models," Javaheri added. "Most of the high valuations are thus going to come from the infrastructure layer."

Data center startups like Crusoe and Lambda garnered some of the market's largest funding rounds last year, indicating a continuing trend of investment in the infrastructure layer of generative AI. Investment firm KKR predicts that global spending on data centers to support AI will climb to $250 billion per year.