AI Investments Rose 62% to $110 Billion in 2024 Despite a 12% Drop in Overall Startup Funding

Yoram Wijngaarde, the founder of Dealroom, has spent years analyzing and providing insights within the tech industry. He noted that although marketplaces drew significant investor interest in the late 1990s and early 2000s, nothing has approached the transformative impact that AI has made on investment activity and valuation. “This is the biggest wave ever by absolute amounts invested,” Wijngaarde stated. “There’s never been anything like it.”

The burgeoning AI landscape is extensive, influencing various domains such as hardware and infrastructure, software applications, foundational models, and more. This broad ecosystem helps explain the substantial funding activities observed.

Highlighting some of the largest AI funding rounds of 2024 underscores the various sectors attracting attention from investors. Notable fundraisers included:

• Anthropic (specializing in large language models and generative AI)
• Waymo (focusing on autonomous vehicle technology)
• Anduril (in the defense sector)
• xAI (providing diverse AI applications)
• Databricks (streamlining data processing and management)
• Vantage (offering data centers and infrastructure solutions)

Though OpenAI is widely recognized as a leading force in AI, it did not secure the highest funding last year; that title belongs to Databricks, which raised $10 billion, compared to OpenAI’s $6.6 billion. Nevertheless, OpenAI’s total funding aggregates to over $20 billion, with another $40 billion reportedly on the horizon, fueled by the success of its viral app, ChatGPT. This positions OpenAI as a critical indicator in the industry’s evolution.

OpenAI’s core business interests—foundational models and generative AI—are pivotal drivers of venture capital activities, with generative AI firms raising $47.4 billion in 2024. Foundational AI technologies have surpassed applications in growth and funding, showcasing the shift in investor focus over the last two years.

The Dealroom analysis was timed with a series of AI events in Paris, coinciding with the French government’s AI Action Summit. A key focus of these gatherings is promoting equitable AI development across various markets, extending beyond the U.S.

The disparity in AI venture capital allocation raises concerns about underfunding outside of the U.S. Dealroom’s data illustrates this imbalance, with a staggering 42% ($80.7 billion) of venture capital raised in the U.S. directed toward AI startups in the past year, starkly contrasting with Europe’s 25% ($12.8 billion) and just 18% in the rest of the global market. However, China stands out, obtaining $7.6 billion in AI investments during the same period.

Wijngaarde highlighted Europe’s current standing, stating, “In Europe, we have a bit of an innovators’ dilemma. We don’t want to replace what we have, which can lead to a less aggressive approach.”

Looking Ahead: AI Funding Trends for 2025

One reason for the significant funding directed at AI startups is the high costs associated with developing and maintaining these services. Building and running large language models demands substantial computational infrastructure. Innovations like DeepSeek, which established an alternative to an OpenAI model at only $50, suggest that open-source approaches could gain more traction in the upcoming years.

Thus far, the growth potential for open-source AI companies appears limited. This trend persists even with the notable presence of Mistral, which brands itself as open-source, and Meta’s involvement in the space.

According to Dealroom, approximately 12% of the AI venture capital last year was invested in startups focused on open-source AI. However, there are various interpretations regarding what qualifies as ‘open source’. For example, xAI is excluded from these numbers, as Grok-1 was open source, but Grok-2 currently isn’t. If xAI’s figures were included, the percentage of funding for open-source projects would climb to 22%.

When it comes to the venture capital firms themselves, Dealroom notes that Antler made the most investments in this sector, followed by notable names such as a16z, General Catalyst, Sequoia, and Khosla Ventures.