Outlays in U.S. AI Skyrocketed Last Year While Investments in Other Tech Fell
Last year, artificial intelligence (AI) startups captured the attention of VC investors to the tune of $110 billion — a 62 percent jump over what those startups raised in 2023.
While early-stage AI opportunities appeared to be all the rage, this high degree of attention came at a steep price for founders seeking seed money to support non-AI tech projects: investments in startup opportunities outside of the realm of AI dropped 12 percent in 2024.
Seven of last year’s top nine funding rounds were AI companies, including such headline grabbers as Databricks, OpenAI, Waymo and Andural. These are just a few of the key findings included in Dealroom’s Opening Moves in Global AI, a recently released report examining the boom in AI-related investments and the impact that boom is having on the overall startup investing landscape around the globe.
As the Dealroom image illustrates, AI-VC investments dominated the landscape in 2024. But not all AI opportunities are created equally, apparently, at least in the eyes of venture capitalists. Dealroom data shows that generative AI models won over the lion's share of VC support in 2024, raising $47.4 billion.
U.S. VCs Take the Lead
Geographic preference may also have played a role in the appeal of AI startups last year. Those based in the U.S. were at the front of the pack, capturing 42 percent, or nearly $81 billion, of the total venture capital dollars invested stateside. Dealroom found the U.S. AI market “raised more than 10x any other country in AI venture capital.”
European AI investments came in at a distant second, accounting for 25 percent, or nearly $13 billion of all AI VC opportunities. China appeared to be playing catch up last year with nearly $8 billion invested in AI startup projects.
However, the appetite for funding AI projects goes well beyond supporting startups.
“AI now makes up a third of global venture capital, more than double the share of two years ago,” concludes Dealroom. As such, “global corporate R&D is now dominated by the Magnificent 7 and other U.S. tech companies, mostly venture backed, and heavily focused on AI.” (The Magnificent 7 refers, of course, to the seven tried and true high-performing stocks — Alphabet, Amazon, Apple, Meta, Microsoft, NVIDIA and Tesla — that have long prevailed in the tech sector.)
But it's not just the tech giants betting big on AI. Dealroom's data shows that Johnson and Johnson, Merck, Pfizer, Eli Lilly, AbbVie, Bristol Myers Squibb, Gilead Sciences, Kolan Tissue Gene, Moderna and Amgen spent a combined $252 billion on U.S.-based R&D last year with the majority of it earmarked for AI expenditures.
Gen AI Opportunities
As mentioned previously, generative AI opportunities — raising more than $47 billion last year —are capturing the majority of global investment dollars, but, once again, U.S. venture capitalists are way ahead of their overseas peers in that area. Since 2019, U.S. VCs have invested nearly $84 billion in generative AI innovations, meaning they spent more than 16 times the amount on GenAI opportunities than any other country. (As a comparison, consider China, which came in a distant second having invested slightly more than $5 billion on Gen AI projects during the same five-year period.)
What does all this mean for U.S. investors?
Although some have warned about the possibility of an “AI bubble,” it’s impossible to witness the billion-dollar bets that U.S. venture capitalists are placing on VC endeavors — particularly generative AI opportunities — and not get caught up on FOMO fever.
It stands to reason that many of the AI projects that are now grabbing the attention of investors will likely bottom out or be absorbed into larger projects that offer stronger fundamentals. Accredited investors would be wise to carefully examine the AI opportunities put in front of them to discern if they offer true, long-term growth potential. One only has to flashback to say 2017 when corporate investing in blockchain technology reached a fever pitch to realize we’ve seen this movie before.
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