Generative AI Funding Reaches New Heights in 2024

The generative AI bubble did not burst in 2024, with investments reaching new heights last year. According to data from financial tracker PitchBook compiled for TechCrunch, generative AI companies worldwide raised $56 billion from VCs in 2024 across 885 deals.

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A Record-Breaking Year

This raw cash total is a new record for the segment, with an increase of 192% from 2023. In 2023, investors poured $29.1 billion into generative AI startups across 691 deals.

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

Q4 Soars to New Heights

Deal value in Q4 2024 soared to $31.1 billion with the closure of mammoth rounds like 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.

Mergers and Acquisitions: A Small Share

Mergers and acquisitions were a small share of generative AI investments in 2024, with $951 million, per PitchBook data. To be clear, this is exclusive of the various "acqui-hire" deals executed by Google, Microsoft, and Amazon.

Google and Microsoft’s Acqui-Hires

Google reportedly paid $2.7 billion to hire much of chatbot startup Character AI’s staff and license its technology, while Microsoft is said to have spent $650 million licensing Inflection’s AI models and hiring its CEO, Mustafa Suleyman.

U.S. Companies Dominate

U.S. companies attracted the bulk of generative AI backing last year, with startups outside the U.S. nabbing just $6.2 billion of all 2024 VC investments in the market.

International Success Stories

However, there were some big winners, like Beijing-based Moonshot AI ($1 billion in February), French startup Mistral (~$640 million in June), Cologne-based company DeepL ($300 million in May), Shanghainese firm MiniMax ($600 million in March), and Tokyo-based Sakana AI (~$214 million in September).

What to Expect in 2025

So what might 2025 hold? Javaheri believes that the generative AI sector risks becoming oversaturated with startups in exceedingly similar (or even identical) verticals.

"To his point," TechCrunch reports, "no fewer than four companies developing AI coding assistants—Augment, Magic, Codeium, and Poolside—closed rounds exceeding $100 million last year."

The Risks of Oversaturation

Javaheri warns that oversaturation can lead to decreased investment in the sector, as well as reduced innovation. "If everyone is doing the same thing, it’s harder for new entrants to come in and disrupt the market," he says.

Conclusion

The generative AI bubble continues to grow in 2024, with investments reaching new heights last year. However, experts warn that oversaturation could be a major risk for the sector in 2025.

As the landscape of generative AI continues to evolve, it will be interesting to see how this plays out in the coming year.