AI investments help venture capital rebound in 2024

AI investments help venture capital rebound in 2024

Major AI firms like OpenAI and xAI secured billions in funding, reinforcing confidence in the sector’s long-term potential.

AI startups have played a key role in reviving United States venture capital funding, with total capital raised in 2024 increasing by nearly 30% year-on-year, according to PitchBook. AI firms secured a record 46.4% of the $209 billion raised, a sharp rise from less than 10% a decade ago. The surge in investment has been driven by growing enthusiasm for AI technology, particularly since OpenAI’s ChatGPT gained widespread attention in late 2022. Major funding rounds, including $6.6 billion for OpenAI and $12 billion for Elon Musk’s xAI, highlight investor confidence in AI’s potential.

Despite the strong investment trends, analysts warn that maintaining such momentum could be challenging, especially for foundation model firms that require significant capital for computing power and expertise. Venture capital funding overall still faces hurdles, with only $76 billion raised in 2024—the lowest in five years. Exit values also remain well below their 2021 peak, although they improved from 2023’s seven-year low. While the IPO market did not recover as quickly as expected, year-end listings like ServiceTitan have provided some renewed optimism.

Hopes for a stronger IPO and M&A market are tied to the incoming administration of President-elect Donald Trump, which is expected to introduce policies favourable to technology and business. Industry experts believe more venture-backed companies could go public in the second half of 2025, helping to sustain the investment rebound. With AI continuing to dominate venture capital funding, the sector’s ability to meet ambitious business milestones will be critical to maintaining investor confidence.

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