AI investments surge to $110 billion in 2024

The artificial intelligence sector experienced a monumental rise in investments during 2024, signaling a shift in venture capital priorities within the tech industry. According to a recent report by Dealroom, AI-focused startups secured an impressive $110 billion in funding, marking a 62% increase from the previous year. In contrast, funding for the broader technology sector saw a decline, with privately-backed companies raising $227 billion—a 12% drop compared to 2023.

Dealroom founder Yoram Wijngaarde, a seasoned analyst and advisor in the tech space, highlighted the unprecedented nature of AI’s investment surge. “This is the biggest wave ever in terms of absolute amounts invested,” Wijngaarde remarked, emphasizing that no previous technological trend has come close to the current AI boom. Unlike previous investment waves, AI encompasses a diverse ecosystem, spanning hardware, infrastructure, foundational models, applications, and more.

Notable funding rounds in 2024 reflected this diversity. Major players such as Anthropic, Waymo, xAI, and Databricks all secured significant investments. Databricks led the pack, raising $10 billion Series J, while OpenAI, despite its high profile and viral ChatGPT app, raised $6.6 billion at a $157 billion valuation.

Generative and foundational AI technologies emerged as the dominant forces driving venture capital interest. Generative AI companies raised $47.4 billion in 2024, while foundational AI technologies saw even more substantial growth. These two areas have become pivotal in shaping the AI landscape, further fueling the investment boom.

OpenAI has become a bellwether for the industry, representing the transformative potential of AI despite not leading in annual funding. With over $20 billion in total funding and reports of another $40 billion in the pipeline, OpenAI exemplifies the immense value investors see in generative and foundational AI technologies.

Dealroom’s report also shed light on regional disparities in AI funding. The United States dominated the scene, with AI startups receiving 42% ($80.7 billion) of global venture capital investment. Europe captured just 25% ($12.8 billion), while the rest of the world accounted for 18%. China stood out with $7.6 billion in AI investments.

Wijngaarde highlighted Europe’s more cautious approach to innovation, which may contribute to its smaller share of AI funding. “We have a bit of an innovators’ dilemma in Europe,” he noted. “We don’t want to replace what we have, and that can be a less aggressive position.”

Despite the dominance of proprietary AI models, open-source AI projects are beginning to carve out a niche. Dealroom’s report indicated that 12% of AI venture funding went to startups focused on open-source AI solutions. However, Orla Browne, Dealroom’s head of insights, noted that the classification of open source can be murky. “For example, while xAI’s Grok-1 was open source, Grok-2 is currently not. Including xAI would increase the share of open-source funding to 22%,” Browne explained.

Despite the challenges, open-source initiatives like Mistral and Meta’s projects are gaining traction in Europe and beyond. As costs for developing and operating large language models remain high, the industry may see a rise in more cost-effective, open-source alternatives in the coming years.

As the AI sector continues to evolve, questions remain about how the investment landscape will develop in 2025. With ongoing advancements in foundational models and potential breakthroughs in open-source AI, the tech ecosystem is poised for further transformation. Dealroom’s findings underscore the growing appetite for AI innovations, setting the stage for another pivotal year in tech investing.

Venture capital firms are likely to remain focused on AI, with Antler leading the charge in 2024, followed by a16z, General Catalyst, Sequoia, and Khosla Ventures. As AI continues to revolutionize industries and redefine technological boundaries, it will undoubtedly remain at the forefront of investment strategies worldwide.