AI deals lift US venture-capital funding to highest level in two years, data shows

VC funding in the US surged to US$55.6 billion in the second quarter, up 47 per cent from US$37.8 billion in the first three months of the year

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Investors’ ongoing excitement around building and adopting artificial intelligence has fuelled the recovery of venture-capital funding in the United States. Photo: Shutterstock

Published: 2:21pm, 3 Jul 2024

United States venture-capital (VC) funding surged to US$55.6 billion in the second quarter on the back of artificial intelligence (AI) deals, marking the highest quarterly total in two years, according to PitchBook data published on Wednesday.

The latest figure shows a 47 per cent jump from the US$37.8 billion that US start-ups raised in the first quarter, largely driven by significant investments in AI companies, including US$6 billion raised by Elon Musk’s xAI and US$1.1 billion raised by CoreWeave.

Investors’ ongoing excitement around building and adopting AI technology, which could potentially bring significant returns, has fuelled the recovery of VC funding.

After reaching a record high US$97.5 billion in the fourth quarter of 2021, US VC funding had been steadily declining. It hit a recent low of US$35.4 billion in the second quarter of 2023, amid a high interest rate environment and a sluggish exit market.

Elon Musk’s artificial intelligence start-up xAI raised US$6 billion in a series B funding round in May to accelerate its challenge to his former allies at ChatGPT creator OpenAI. Photo: Shutterstock

The recent influx of capital into AI start-ups has reversed the downward trend, prompting more investors to double down on companies involved in AI foundation models, as well as applications from code generation to productivity tools.