In 2024, doubts about the generative AI sector bursting were put to rest. Investments in generative AI, which encompasses a range of applications, tools, and services for generating text, images, video, speech, music, and more, reached new heights last year. According to data from financial tracker PitchBook, compiled for TechCrunch, generative AI companies worldwide attracted $56 billion in venture capital funding across 885 deals in 2024. This amount sets a new record for the segment, marking a 192% increase from 2023 when investors poured $29.1 billion into generative AI startups through 691 deals.
“We’re not seeing a slowdown in funding for generative AI, as major names like OpenAI, Anthropic, and xAI continue to secure large investments and release new, competitive products,” said Ali Jahavari, a technology analyst at PitchBook, in an interview.
The deal value for Q4 2024 soared to $31.1 billion, driven by massive funding rounds such as Databricks’ $10 billion Series J round, xAI’s $6 billion Series C, Amazon’s $4 billion strategic investment in Anthropic, and OpenAI’s $6.6 billion round. Mergers and acquisitions represented a small portion of generative AI investments in 2024, totaling $951 million, according to PitchBook. This figure excludes various “acqui-hire” deals struck by Google, Microsoft, and Amazon. For instance, Google reportedly spent $2.7 billion to hire much of the staff from chatbot startup Character AI and license its technology, while Microsoft is said to have invested $650 million to license AI models from Inflection and hire its CEO, Mustafa Suleyman.
American companies accounted for the bulk of generative AI funding last year. Startups outside the U.S. attracted just $6.2 billion from all venture investments in the market in 2024. However, there were notable exceptions, including Beijing-based Moonshot AI, which raised $1 billion in February, French startup Mistral, which secured around $640 million in June, Cologne-based DeepL, which raised $300 million in May, Shanghai’s MiniMax, which obtained $600 million in March, and Tokyo-based Sakana AI, which secured approximately $214 million in September.
What does 2025 have in store for the sector? Jahavari warns that the generative AI field could face oversaturation, with many startups working on strikingly similar, if not identical, verticals. He pointed out that at least four companies focused on AI coding assistants—Augment, Magic, Codeium, and Poolside—closed rounds exceeding $100 million last year. Similarly, numerous generative media startups, such as Black Forest Labs and ElevenLabs, have recently raised tens of millions of dollars at sky-high valuations. This trend might prove unsustainable, as investors increasingly demand demonstrable revenue growth.
Jahavari also highlighted that the technical challenges and immense computational costs required to stay competitive could become additional hurdles for generative AI businesses. “Only startups with the best funding will be able to keep up with the pace needed for the most innovative models,” he added. “Thus, the highest valuations will likely come from infrastructure-level players.”
This is certainly great news for the “infrastructure-level” generative AI players, who performed well in 2024. Data center startups like Crusoe ($600 million in December) and Lambda ($320 million in February) secured some of the largest funding rounds in the generative AI space. Investment firm KKR predicts that the growing demand for data centers to support AI will increase global spending in this sector to $250 billion per year.
