Investments in generative AI, which encompasses a range of AI-powered applications, tools and services for generating text, images, video, speech, music and more, reached new heights last year. Generative AI companies worldwide raised $56 billion from VCs in 885 deals in 2024, according to data from financial tracking site PitchBook compiled for TechCrunch.
This raw cash total is a new record for the segment. It’s up 192% since 2023, when investors poured $29.1 billion into generative AI startups across 691 deals.
“We don’t see a slowdown in productive AI funding as big names like OpenAI, Anthropic, and xAI continue to raise significant funding and launch new, competitive products,” Ali Javaheri, a new technology analyst at PitchBook, said in an interview.
Transaction in the fourth quarter of 2024 with the completion of major rounds such as 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 its value increased to 31.1 billion dollars.
Mergers and acquisitions accounted for a small portion of productive AI investments in 2024: $951 million, according to PitchBook data. To be clear, this doesn’t include the various “buy-hire” deals run by Google, Microsoft, and Amazon. Google reportedly paid $2.7 billion to hire most of chatbot startup Character AI’s staff and license its technology, while Microsoft reportedly spent $650 million to license Inflection’s AI models and hire its CEO Mustafa Suleyman .
US companies pulled most of their generative AI support last year. Startups outside the US captured just $6.2 billion of all 2024 VC investments in the market. However, Beijing-based Moonshot AI ($1 billion in February), French startup Mistral (~$640 million in June), Cologne-based company DeepL ($300 million in May), Shanghai firm MiniMax (~$600 million in March) There were also some big winners, like USD) and Tokyo-based Sakana AI (~$214M in September).
What Awaits Artificial Intelligence in 2025?
Javaheri believes that the productive AI sector risks becoming oversaturated with startups in extremely similar (or even the same) verticals. In his view, at least four companies developing AI coding assistants — Augment , Magic , Codeium and Poolside — closed rounds exceeding $100 million last year. And a number of prolific media startups (e.g. Black Forest Labs , ElevenLabs ) have recently raised tens of millions of dollars in funding at sky-high valuations.
This trend may not be sustainable as investor pressure increases to show visible revenue growth.
According to Javaheri, technical challenges and the enormous computing costs required to remain competitive could create additional challenges for productive AI startups. “Only the best-funded startups can keep pace with the pace required for the most innovative models,” he added. “So most of the higher valuations will come from the infrastructure layer.”
This is, of course, very good news for the “infrastructure layer” prolific AI players who are doing quite well for themselves in 2024. Data center startups like Crusoe ($600 million in December) and Lambda ($320 million in February) represented some of the generative AI market’s biggest rounds.
Investment firm KKR predicts that increased demand for data centers to support artificial intelligence will increase global spending in the sector to $250 billion annually.
