PitchBook: Tech giants invested more in generative AI startups than VCs this year

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Amazon.com Inc., Microsoft Corp. and Google LLC invested significantly more in generative artificial intelligence startups this year than venture capital firms, according to new PitchBook Inc. research.

The market intelligence company’s findings were published today by the Financial Times. PitchBook estimates that generative AI startups raised about $27 billion from investors in 2023. Amazon, Microsoft and Google accounted for about two-thirds of that sum, or $18 billion.

The largest generative AI deal of 2023 was Microsoft’s $10 billion investment in OpenAI. According to Semafor, a “significant” portion of the deal’s value will be provided in the form of Azure cloud credits. Microsoft will reportedly receive 75% of OpenAI’s profits until it recoups the investment, at which point it’s expected to take a 49% stake in the AI developer.

The generative AI company that raised the most capital after OpenAI is Anthropic PBC. It provides a large language model called Claude-2 that can perform many of the same tasks as ChatGPT. Anthropic secured an investment worth up to $4 billion from Amazon in September and, a few weeks later, received another funding round worth up to $2 billion from Google.

Alongside Amazon, Microsoft and Google, Nvidia Corp. has also emerged as a major generative AI investor in 2023. DealBook estimates that the chipmaker backed 35 funding rounds this year, nearly six times more than in 2022. The market intelligence provider believes that made Nvidia this year’s “most active large-scale investor in AI” excluding accelerator funds.

A sizable portion of the generative AI startup funding that wasn’t raised by OpenAI or Anthropic went to competing large language model developers. Earlier this month, LLM provider Mistral closed a $415 million round led by Andreessen Horowitz and Lightspeed Venture Partners. A few weeks earlier, rival AI21 Labs Ltd. raised $115 million from a consortium that included Nvidia, Google and a half dozen dozen other investors.

Venture activity in the generative AI market started slowing during the third quarter. According to PitchBook, the number of funding rounds raised by generative AI startups dropped 29% from the previous quarter. However, the combined dollar value of those rounds increased thanks to the up to $4 billion investment Anthropic secured from Amazon in September.

The generative AI market’s largest players are expected to receive yet more funding in 2024. Last week, Bloomberg reported that OpenAI is holding talks about raising new capital at a valuation exceeding $100 billion. Rival Anthropic, meanwhile, is said to be seeking a $750 million investment at a valuation of $15 billion.

Photo: Unsplash

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