AI Startups Raise $48.4 Bn So Far This Year, Surpassing All Of 2023 By 25%: Report

After raising a record amount of fresh capital in the first half of the year, AI startups have seen a considerable decline in VC funding activity in Q3 2024. Three weeks before the end of the quarter, the total value of deals hit USD 8.6 billion, or 35 per cent less than in Q3 2023. But despite the apparent decline, 2024 remains the record year for investing in AI startups.

According to data presented by AltIndex.com, AI startups have raised USD 48.4 billion year-to-date, or 25 per cent more than in the entire 2023.

Record Amount of Fresh Capital Despite the VC Funding Drop

After two years of unstoppable growth, the AI sector is experiencing mixed investor sentiment, triggered by the US government's expanded export restrictions on AI chips to China, expectations of future interest rate cuts, concerns about the AI giants` valuations, and their disappointing earnings reports.

The softened investor's optimism about artificial intelligence has triggered a significant decline in the VC funding activity in Q3, with the total value of deals falling by 35 per cent year-over-year to USD 8.5 billion. The number of investments also dropped. The Crunchbase data show AI startups saw 638 VC investments in the nine months of 2024, down from 914 in the same period of 2023.

But despite that significant decline, AI startups already raised much more money than last year. According to Crunchbase data, VC investors poured USD 38.8 billion on fresh capital in the AI sector in 2023, or 25 per cent less than year-to-date. Moreover, with USD 48.4 billion raised in the nine months, AI startups have also set a new record, outperforming 2021's USD 48.3 billion, now the second-highest funding amount in the market`s history.  

Cumulative Funding Climbs to Over USD 237 Billion

With USD 48.4 billion raised in funding rounds during the nine months of the year, the cumulative funding amount in the AI sector has jumped to over USD 237 billion. In comparison, that is USD 13 billion more than the total funding amount in the IT startup market.

Statistics show US companies raised almost 65 per cent of that value, or USD 151 billion, with California as the leading hub. Their Asian counterparts saw three times less fresh capital, or nearly USD 52 billion, while European AI startups follow with USD 31.3 billion.

The Crunchbase data also shows most of the VC investments in the AI field went to machine learning startups, which raised USD 113.6 billion so far. AI software and information technology startups follow, with USD 76.8 billion and USD 59.5 billion, respectively.