AI startups raised nearly $50 billion in 2023. Some major players, such as OpenAI and Anthropic, raised large multi-billion dollar sums on their own.
The AI sector saw its first investment surge at the end of 2022, when several startups raised large sums, including Stability AI, video and audio editing AI tool Descript, and AI content platform Jasper.
The trend continued into 2023, with more than 70 funding rounds of $100 million or more, according to Crunchbase data.
Microsoft's $10 billion investment in OpenAI in January boosted the market. Valuations of AI companies such as Anthropic and OpenAI rose sharply throughout the year.
Anthropic's valuation is currently between $20 billion and $30 billion, after raising $2 billion and $4 billion from Google and Amazon, respectively.
OpenAI's valuation rose from $29 billion to $86 billion. Inflection AI raised $1.3 billion at a valuation of $4 billion at the end of June 2023.
International investment also picked up: Paris-based Mistral AI and Germany's Aleph Alpha closed funding rounds of up to $500 million.
Many question marks for 2024
Whether and how this trend will continue in 2024 is still unclear. Large tech companies such as Microsoft, OpenAI, and Google are trying to dominate the AI market at all levels - infrastructure (cloud), models, and applications.
OpenAI and Google, for example, not only offer chatbots, but also image generators, web browsing and eventually video generators. This means that they are taking more and more functionality away from startups. They have the money to make up for the losses, which can be high given the current inefficient state of generative AI.
However, big AI companies are also the largest investors in AI startups, as much of the investment in startups goes back into their cloud and hardware businesses. This improves their growth numbers and thus drives up their stock prices.
But they have not yet achieved complete dominance: Some specialized platforms, such as Midjourney, seem to be able to carve out a niche and even make money by offering a higher-quality product than Big AI. And some Big AI products, such as Microsoft's Copilot offering or Google's Gemini, still can't hold a candle to the success of OpenAI's ChatGPT.
In addition, Big AI faces legal consequences and regulatory challenges that are slowing its growth. However, startups could be hit even harder by unresolved but fundamental issues, such as the copyright of training data.
