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AI investment soars to US$110B in 2024 as startup funding declines

AI investments hit $110B in 2024, soaring 62% as tech startup funding drops 12%. The U.S. leads, but Europe lags. Open-source AI may reshape trends.

Venture capitalists pour billions into artificial intelligence, but funding for the broader tech industry is declining. According to new data from analytics firm Dealroom, AI startups raised US$110 billion in 2024, marking a 62% increase from the previous year. Meanwhile, overall funding for privately backed tech companies, including startups and scale-ups, fell to US$227 billion—a 12% drop compared to 2023.

Yoram Wijngaarde, founder of Dealroom, describes this AI boom as the largest wave of investment in history. “There’s never been anything like it,” he said, pointing to AI’s influence across multiple industries, from hardware and infrastructure to applications and foundational models. Unlike previous tech trends, AI’s reach is much broader, leading to unprecedented funding levels.

Several major companies secured large investments in 2024. Among the top recipients were Anthropic (generative AI), Waymo (self-driving technology), Anduril (defence), xAI (applications), Databricks (AI data processing), and Vantage (data centres and infrastructure).

While OpenAI is often seen as the face of AI innovation, it was not the year’s biggest fundraiser. That title went to Databricks, which raised US$10 billion, surpassing OpenAI’s US$6.6 billion. However, OpenAI remains a key player, with over US$20 billion in funding and another US$40 billion reportedly in the pipeline. Its focus on foundational models and generative AI has driven much of the venture capital activity, with generative AI startups securing US$47.4 billion in 2024 alone.

The Dealroom report was released before AI events in Paris, including the French government’s AI Action Summit. One key topic is the push for more balanced AI development worldwide, as most AI funding remains concentrated in the U.S. Last year, 42% of venture capital raised in the U.S. went to AI startups (US$80.7 billion). In comparison, Europe received just 25% (US$12.8 billion), and the rest of the world secured 18%. China stood out with US$7.6 billion in AI investment.

Wijngaarde believes Europe faces an “innovators’ dilemma,” where hesitation in disrupting existing industries could slow progress. This cautious approach contrasts with the aggressive AI expansion seen in the U.S. and China.

What’s next for AI funding in 2025?

The surge in AI investment has largely been driven by the high costs of developing and running large language models. However, the rise of open-source alternatives, such as DeepSeek, could reshape the landscape. DeepSeek recently built an OpenAI competitor for just US$50, hinting at a future where AI development becomes more cost-effective.

Despite this, open-source AI remains a small segment of the market. Dealroom estimates that only 12% of AI venture capital funding in 2024 went to open-source projects. This figure could be higher if companies like xAI, which initially released an open-source model before shifting to a closed approach, were included. With xAI in the mix, open-source AI funding would have accounted for 22% of the total.

Among venture capital firms, Antler led AI investments in 2024, followed by a16z, General Catalyst, Sequoia, and Khosla Ventures. As AI continues to dominate the investment landscape, the coming year will reveal whether open-source alternatives can gain more traction or if big-budget AI development will maintain its lead.

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