Monday, July 22

Investors Plough $27.1 Billion Into AI Startups Despite Economic Struggles

In May, CoreWeave, a provider of cloud computing services for AI companies, raised $1.1 billion, followed by $7.5 billion in debt, reaching a valuation of $19 billion. Scale AI, a data provider for AI companies, secured $1 billion, at a valuation of $13.8 billion. Additionally, xAI, founded by Elon Musk, raised $6 billion, reaching a valuation of $24 billion.

According to Kyle Stanford, research analyst at PitchBook, these funding rounds have increased overall deal volume in the industry, both in terms of dollar amounts and number of deals.

“It’s not declining anymore,” he said. “The bottom has already fallen out.”

The surge in activity has prompted some venture capitalists to revise their outlook. Last year, IVP investor Tom Loverro predicted a “mass extinction event” for startups and urged them to cut costs. Last week, he announced that era was over and called the current period the “Great Awakening,” encouraging companies to accelerate growth, especially in artificial intelligence.

“The AI ​​train is leaving the station and you need to get on it,” he wrote on X.

The startup crisis began in early 2022, when many loss-making companies struggled to grow as rapidly as they did during the pandemic. Rising interest rates also pushed investors to seek safer investments. To cope with the drop in funding, startups cut staff and scaled back their ambitions.

Then, in late 2022, OpenAI, a San Francisco-based AI lab, sparked a new boom with the release of its ChatGPT chatbot. The excitement over generative AI technology, which can produce text, images, and video, has sparked a frenzy of startup creation and funding.