AI startup funding more than doubles in Q2, Crunchbase data shows

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(Reuters) – Investments in artificial intelligence (AI) startups surged to $24 billion from April to June, more than doubling from the previous quarter, according to data from Crunchbase, highlighting the growing appetite for the new technology.

Overall startup funding grew 16% sequentially to touch $79 billion in the last quarter, primarily driven by investments in AI, which became the largest sector for the first time, followed by healthcare and biotech.

WHY IT IS IMPORTANT

The runway success of OpenAI’s ChatGPT has unleashed a race to adopt the latest AI technology in areas such as business productivity, healthcare, and manufacturing. Investors and Big Tech firms, however, say that meaningful gains from their massive investments in AI will only materialize over the next few years.

IN NUMBERS

Five out of six billion-dollar funding rounds went to AI companies.

Top deals included Elon Musk’s xAI raising $6 billion and AI infrastructure provider CoreWeave’s raising $1.1 billion in its latest funding round. Also on the list, automated driving company Wayve and data preparation company Scale AI.

Outside of AI, cybersecurity company Wiz raised a billion-dollar in its latest funding round.

BROADER LANDSCAPE

Despite last quarter’s uptick, startup funding remains low compared to the levels seen in the past three years.

Global funding declined 5% to $147 billion in the first half of the year and was flat compared to the second half of 2023, according to Crunchbase.

A tight monetary policy in the U.S. has contributed to a slow revival in initial public offerings, hampering what is among the biggest sources of returns for institutional private market investors, who typically invest in startups and sell shares during IPOs.

(Reporting by Yuvraj Malik in Bengaluru; Editing by Tasim Zahid)