Investment in artificial intelligence accelerates: number of global deals hits 2-year high

Global AI transaction volume reached 1,245 in Q3 2024, a level not seen since Q1 2022, reflecting how confident and resilient investors are regarding AI investments.

With 24% year-over-year growth, global AI offerings far outperformed -10% falls quarterly (Tquarterly) on the broader investment market. CB Insights notes in its Q3’24 State of AI report that despite the slowdown in broader risk trends, investor resistance and confidence in AI stay strong

CB Insights says that “while AI deals in Q3’24 included massive rounds of more than $1 billion to defense technology provider Anduril and the AI ​​lab Superintelligence for sureglobal AI funding is actually down 29% QoQ.” The 77% drop in funding from $1B ToT AI rounds contributed to the 29% ToT drop.

The average size of AI deals grew 28% this year, rising from $18.4 million in 2023 to $23.5 million. This year’s deal size gains are attributed to five rounds of more than $1 billion this year, including xAIs $6 billion Series B at a $24 billion valuation, of anthropology $2.8 billion Series D at a $18.4 billion valuation, Anduril’s $1.5 billion Series F at a $14 billion valuation, G42 $1.5 billion investment from Microsoft and CoreWeave $1.1 billion Series C at a $19 billion valuation. CB Insights notes that these deals alone are not responsible for the entire average increase, noting that the average size of AI deals has grown by 9% in 2024 so far.

US AI startups attracted $11.4 billion in investment across 566 deals in Q3 2024, accounting for over two-thirds of global AI funding and 45% of global AI deals. European AI startups attracted $2.8 billion from 279 deals, and Asian AI startups received $2.1 billion from 316 deals.

Generative AI and industry-specific AI drive investment

The anticipated productivity gains and potential cost reductions that generative AI and industry-specific AI offer are key to investor confidence and driving more AI offerings.

Enterprises have already learned how to prioritize AI and broader AI investments that deliver measurable value at scale. This is one of the main factors that continues to fuel more venture investments than other opportunities. Gartner’s AI Generative Planning Survey 2024 reflects how eager senior management is for results, correlating with CB Insight findings.

One of the key findings of the Gartner Survey is that senior executives expect – and lead – AI projects to increase productivity by 22.6%, surpassing revenue growth of 15.8% and cost savings of 15.2%. While cost efficiencies and revenue gains matter, Gartner estimates that the most immediate and substantial impact will be on increased operational efficiency. Gartner predicts that businesses that prioritize AI integration will see significant increases in both workflow optimization and financial performance.

CB Insights provides a comprehensive analysis of deals closed in Q3, reflecting the growing dominance of the AI ​​genre and industry-specific AI investments. The following offers support this finding:

Investments in IA generation in Q3:

• Safe Superintelligence has raised a massive $1 billion Series A round, indicating continued strong interest in large language models (LLM) and general purpose AI systems.
• Baichuan AI, a Chinese generative AI company, has secured $688 million in Series A funding.
• Moonshot AI, another AI generation startup, has raised $300 million in a Series B round.
• Codeium, an AI company that generates code, has become a unicorn with a $150 million Series C round.

Industry-Specific AI Investments in Q3:

• Anduril, an artificial intelligence-based defense technology company, has raised $1.5 billion in a Series F round, highlighting interest in AI for national security applications.
• ArsenalBio has secured $325 million for AI in biotech and drug discovery.
• Helsing has raised $488 million for AI applications in defense and security.
• Altana AI received $200 million for AI in supply chain management and logistics.
• Flo Health raises $200 million for AI-powered women’s health apps.

New AI unicorns doubled in T3

Gen AI continues to be one of the main catalysts driving the formation and growth of unicorns (private companies reaching valuations of over $1 billion). CB Insights found that the number of unicorns more than doubled quarterly, reaching 13 in the last quarter. This represents 54% of the broader risk total for Q3 2024.

More than half of the AI ​​unicorns launched in the last quarter are AI generation startups. They target a wide range of domains, including AI for 3D environments (World laboratories), code generation (Code), and legal workflow automation (Harvey). Among the new GenAI unicorns of Q3’24, Safe Superintelligence, co-founded by OpenAI co-founder Ilya Sutskever received the highest rating. The AI ​​lab was valued at $5 billion after raising a $1 billion Series A round in September 2024.

The challenges of the Gen AI enterprise are just beginning

The potential of genre and industry-specific AI to improve productivity, help generate new revenue streams and reduce costs keeps investors resilient and focused on results.

From the many organizations raising additional funding to startups and new unicorns, the challenge will be to get adoption at scale and robust enough to sustain recurring revenue while keeping costs down.

As CIOs and CISOs look to scale back the tools and applications they already have, the most successful startups will need to find new ways to incorporate and integrate AI into existing applications and workflows. This will be a challenge as each enterprise has its own data management challenges, siled legacy systems and the need to update its data accuracy, quality and security strategies.

Startups and unicorns that can meet all these challenges and improve their customers’ operations at the data level first are the most likely to deliver the results investors expect.