If there was any doubt, the generative AI bubble did not burst in 2024. Investments in generative AI, which encompasses a range of AI-powered apps, tools, and services to generate text, images, videos, speech, music, and more, reached new heights last year.
Generative AI Funding Reaches Record High
According to data from financial tracker PitchBook compiled for TechCrunch, generative AI companies worldwide raised $56 billion from VCs in 2024 across 885 deals. That raw cash total is a new record for the segment. It’s up 192% from 2023, when investors poured $29.1 billion into generative AI startups across 691 deals.
"We aren’t seeing a slowdown in generative AI funding, as big names like OpenAI, Anthropic, and xAI continue to secure major raises and release new, competitive products," said Ali Javaheri, an emerging technology analyst at PitchBook, in an interview. "The trend is clear: investors are pouring money into generative AI, and it’s not slowing down anytime soon."
Q4 2024 Sees Record Deal Value
Deal value in Q4 2024 soared to $31.1 billion with the closure of mammoth rounds like Databricks’ $10 billion Series J, xAI’s $6 billion Series C, Anthropic’s $4 billion strategic investment from Amazon, and OpenAI’s $6.6 billion round.
Mergers and Acquisitions in Generative AI
Mergers and acquisitions were a small share of generative AI investments in 2024: $951 million, per PitchBook data. To be clear, that’s exclusive of the various ‘acqui-hire’ deals executed by Google, Microsoft, and Amazon. Google reportedly paid $2.7 billion to hire much of chatbot startup Character AI’s staff and license its technology, while Microsoft is said to have spent $650 million licensing Inflection’s AI models and hiring its CEO, Mustafa Suleyman.
Global Generative AI Funding Breakdown
U.S. companies attracted the bulk of generative AI backing last year. Startups outside the U.S. nabbed just $6.2 billion of all 2024 VC investments in the market. There were some big winners, however, like Beijing-based Moonshot AI ($1 billion in February), French startup Mistral (~$640 million in June), Cologne-based company DeepL ($300 million in May), Shanghainese firm MiniMax ($600 million in March), and Tokyo-based Sakana AI (~$214 million in September).
Looking Ahead to 2025
So what might 2025 hold? Javaheri believes that the generative AI sector risks becoming oversaturated with startups in exceedingly similar (or even identical) areas. "We’re seeing a lot of overlap between different companies and their technologies," he said. "It’s going to be interesting to see how this plays out in 2025."
The Challenges Ahead
One major challenge facing the generative AI industry is the need for more transparency and accountability. As these technologies become increasingly sophisticated, there are growing concerns about bias, accuracy, and safety.
"We need to have a much more nuanced conversation about what it means to be ‘transparent’ in AI development," said Javaheri. "It’s not just about open-sourcing code or publishing research papers – we need to think about the social implications of these technologies and how they’re being used."
The Future of Generative AI
Despite the challenges ahead, there are many exciting developments on the horizon for generative AI. From advancements in natural language processing to breakthroughs in computer vision, this field is rapidly evolving.
As we look to 2025 and beyond, it’s clear that generative AI will continue to play a major role in shaping our world. Whether it’s revolutionizing industries or transforming the way we interact with technology, the future of generative AI is full of promise – and potential pitfalls.
