According to the latest data, in the third quarter of 2024, venture capital (VC) investments in generative AI startups reached $3.9 billion across 206 deals. While these figures are impressive, it's important to note that this total does not include OpenAI's $6.6 billion funding round.
Among these, U.S. companies stood out, securing $2.9 billion in funding across 127 deals. Notably, several well-known startups received substantial investments this quarter. For instance, coding assistant Magic raised $320 million in August, enterprise search provider Glean secured $260 million in September, and business analytics firm Hebbia received $130 million in July. Additionally, China's Moonshot AI raised $300 million in August, while Japan's Sakana AI completed a $214 million funding round last month.
Of course, generative AI is not without controversy. Despite some investors' confidence, experts question the reliability of this technology, especially regarding the legality of using copyrighted data without authorization. Nevertheless, venture capitalists seem willing to bet on the future of generative AI, believing it will take root and continue to grow in many large and profitable industries.
Data shows that Forrester predicts 60% of skeptics towards generative AI may gradually accept the technology, whether for information summarization or creative problem-solving, a figure significantly higher than Gartner's earlier prediction that by 2026, 30% of generative AI projects will be abandoned after proof of concept.
However, there is an undeniable obstacle to the widespread adoption of generative AI: its enormous demand for computational power. According to Bain's research, generative AI could force businesses to build gigawatt-scale data centers, which consume 5 to 20 times the energy of the current average, potentially straining already tight power supply chains.
To address this challenge, many of the world's largest cloud service providers, such as Microsoft, Amazon, Google, and Oracle, have begun investing in nuclear energy to reduce reliance on non-renewable resources. Microsoft recently announced plans to use power from the famous Three Mile Island nuclear plant, though these investments may take years to bear fruit.
Despite the challenges, investment enthusiasm for generative AI startups remains high. For example, the popular voice cloning tool Eleven Labs is seeking funding at a $3 billion valuation, while the notorious image generator behind the X platform, Black Forest Labs, is in talks for a $100 million funding round.
Key Points:
🌟 In the third quarter, venture capital investments in generative AI startups totaled $3.9 billion, mainly concentrated among U.S. companies.
🚀 Notable startups like Magic, Glean, and Hebbia received tens of millions in funding.
⚡ Generative AI faces significant computational demands and legal challenges, yet investment enthusiasm remains strong.