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AI Investments Propel US Venture Capital Funding to Two-Year High



Artificial Intelligence (AI) innovation has driven a remarkable surge in US venture capital (VC) funding, reaching a peak not seen in two years. According to recent data from PitchBook released on Wednesday, funding skyrocketed to $55.6 billion in the second quarter of the year. This marks a substantial 47% increase from the $37.8 billion raised in the previous quarter.

The surge in funding can be largely attributed to significant investments in AI companies. Leading the charge were notable contributions such as $6 billion secured by xAI, spearheaded by Elon Musk, and $1.1 billion by CoreWeave. Investors are increasingly drawn to AI technologies following the successful launch of OpenAI’s ChatGPT chatbot, anticipating substantial returns from AI-driven revenue streams.

“Investors place a premium on AI ventures due to their substantial capital requirements,” noted Casber Wang, partner at Sapphire Ventures. “The rise in viable commercial applications for AI is generating tangible revenue, further fueling investor confidence.”

“After reaching a recent low of $35.4 billion in the second quarter of 2023, the recent influx of capital into AI startups has reversed this downward trend,” Wang added.

Despite the robust deal flow, the exit landscape remains challenging, with smaller deals generating approximately $23.6 billion in exit value this quarter, down from $37.8 billion in the previous quarter. The IPO market continues to struggle for momentum, even with notable listings such as Rubrik (RBRK.N).

Looking ahead, experts anticipate an uptick in mergers and acquisitions (M&A) within the AI sector for the latter half of the year. Andrew Harrison, CEO at VC firm Section 32, commented, “They put venture dollars down first and watched how it evolved and started to shake out. Now I think they’re more serious about which pieces of the puzzle they want to own as they’re starting to see the emerging winners.”

The resurgence in VC funding underscores a renewed optimism in AI’s transformative potential across industries, setting the stage for continued growth and innovation in the sector.

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