In recent months, AI has become the tech industry’s “golden goose,” attracting major players like Microsoft, Apple, and Amazon. The AI boom has transformed sectors from healthcare to finance and driven massive investments, with $24 billion invested in AI startups from April to June 2024 alone, doubling the previous quarter’s figure according to Crunchbase.
This surge in AI funding has significantly boosted overall startup investments, which grew by 16% to $79 billion last quarter. AI has now overtaken traditionally dominant sectors like healthcare and biotech as the top investment area for startups.
Several factors contribute to this rise in AI investments. The success of OpenAI’s ChatGPT has intensified competition to adopt AI, and recent major funding rounds, such as Elon Musk’s xAI raising $6 billion and CoreWeave securing $1.1 billion, highlight the industry’s growth. Other notable investments include billion-dollar rounds for Wayve (automated driving), Scale AI (data preparation), and Xaira Therapeutics (AI-powered biopharmaceutical research).
Despite the AI investment boom, the overall funding environment remains cautious. Total startup funding in Q2 2024, while up 16% to $79 billion, is still below pre-downturn levels. Global funding for the first half of 2024 reached $147 billion, a 5% year-over-year decline. This cautiousness is likely due to tight US monetary policy affecting IPOs, a traditional exit route for investors.
Late-stage funding increased slightly to $36 billion, focusing on established AI companies, autonomous driving, electric vehicles, cybersecurity, drug development, and quantum computing. Seed funding has shown resilience, averaging $8 billion per quarter over the past five quarters, indicating companies are remaining in the seed stage longer due to the current funding climate.
