Venture capital investments in generative AI have been on the rise this year, despite a general decline in overall VC investments due to macroeconomic challenges. According to PitchBook, funding for AI-related startups reached an impressive $68.7 billion in 2023, with a significant portion of that attributed to generative AI companies like OpenAI, Stability AI, and Anthropic. However, a new report by PitchBook suggests that these top-level figures may be misleading.
Key Takeaway
New data reveals that mega-deals, including multi-hundred-million-dollar investments, may be inflating the overall funding figures for generative AI. While the sector still enjoys substantial investment, the actual numbers are lower once these mega-deals are factored out.
The Rise of “Mega-deals”
PitchBook’s report, focusing on AI investment in Q3, highlights the influence of “mega-deals” in inflating the total funding numbers. These mega-deals refer to multi-hundred-million-dollar investments from renowned backers. Some notable examples include Amazon’s $4 billion investment in Anthropic, Microsoft’s $10 billion investment in OpenAI, and a $1.3 billion funding round led by Microsoft for Inflection AI.
A Deeper Look
In Q3 alone, VC funding, including these mega-deals, reached approximately $22.1 billion. However, after subtracting the investments led by tech giants, the actual funding for the generative AI sector was closer to $15.1 billion. This significant difference suggests that the total funding figures may be artificially inflated by these large-scale deals.
Implications for the AI Sector
While the generative AI sector is undoubtedly attracting substantial investments, it is crucial to recognize the influence of mega-deals in creating inflated figures. While these investments bring in significant capital and may indicate the confidence of major players in the sector, it is important to consider the overall landscape of AI funding accurately.
