Despite some recent concerns, no slowdown in enthusiasm! Apparently, VCs are still pouring billions into generative AI startups!

As reported by TechCrunch (VCs are still pouring billions into generative AI startups, written by Kyle Wiggers and available here), investments in generative AI startups – those that are creating AI-powered products to generate text, audio, video and more – aren’t slowing down. But they’re being consolidated into a shrinking number of early-stage ventures.

In just over the first half of 2024, from January to July 16, 225 startups raised $12.3 billion from VCs, according to Crunchbase data shared with TechCrunch. Should the trend maintain, generative AI companies are on track to match or exceed the roughly $21.8 billion they raised in 2023.

Here’s how the H1 2024 total broke down by stage:

• 198 angel/seed deals: $500 million
• 39 early-stage deals: $8.7 billion
• 18 late-stage deals: $3.1 billion

Early-stage startups were the clear winners, like Elon Musk’s xAI (which raised $6 billion in May), China’s Moonshot AI ($1 billion in February), Mistral AI ($502.6 billion in June), Glean ($203.2 million in February) and Cognition ($175 million in April). According to Chris Metinko, an analyst and senior reporter at Crunchbase, investors appear to be betting on big startups they see as having a high chance of success while letting those they’re less sure about “wither away” at the earlier stages.

Potential issues that could slow down the market include copyright infringement litigation and the lack of high-quality training data. Not only that, given the substantial upfront investment required to build flagship models, few generative AI startups are profitable – not even big guns such as OpenAI and Anthropic. According to The Information, OpenAI, which is reportedly generating around $3.4 billion in revenue, could end up losing $5 billion this year. Ouch.

So, what do you think? Are you surprised that VCs are still pouring billions into generative AI startups? Please share any comments you might have or if you’d like to know more about a particular topic.

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