While the broader venture capital financing market continues to experience headwinds and turbulence, artificial intelligence (AI) deal activity has been a bright spot for companies and investors, with relatively robust deal activity and sustained investor interest, which are expected to continue into 2025.
According to CB Insights, while the dollar amount of AI funding dropped quarter-over-quarter due to a decreased number of $1B+ unicorn financing mega-rounds, global AI deal count rose by 24% quarter-over-quarter to reach 1,245 deals in Q3 2024, marking the highest quarterly level since Q1 2022, and contrasted with an overall drop of 10% quarter-over-quarter in the broader venture financing market. The number of deals is indicative of broad investor appetite and interest in AI as a driver of investment return for the foreseeable future and extends across various aspects of the AI and machine-learning marketplace, including horizontal platforms, vertical platforms, semiconductors, and autonomous machines. In addition to traditional VC investors, PitchBook also reports continued investment by and interest of the largest of the world’s corporations in AI to ensure competitive positioning in various industries, and those activities portend well for the AI venture market writ large and the financing market specifically.
As in the past, the United States continues to lead in AI funding and deals—being responsible for 2/3 of all deals in the sector—as compared with the rest of the globe. It remains to be seen whether the mergers and acquisitions and IPO markets, which have been choppy in 2024, will correct and support the continued investment in the AI venture capital market that has been encouraging in 2024. However, the continued broad support across industry players, coupled with the new administration’s installation of a number of major proponents of AI in high-level positions, has many believing the momentum behind AI will continue through 2025.
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