Tech giants Amazon.com Inc., Microsoft Corp., and Google LLC have invested more in generative AI startups this year than venture capital (VC) firms, according to research by PitchBook Inc. In 2023, generative AI startups raised around $27 billion from investors, with Amazon, Microsoft, and Google contributing approximately $18 billion, comprising two-thirds of the total investment.
The largest generative AI deal of the year was Microsoft’s $10 billion investment in OpenAI. The agreement involves providing a significant portion of the investment in the form of Azure cloud credits. Microsoft is expected to receive 75% of OpenAI’s profits until the investment is recouped, after which it will hold a 49% stake in the AI developer.
Among the generative AI startups, Anthropic PBC received the second-highest capital after OpenAI. The company secured a $4 billion investment from Amazon in September and, a few weeks later, received another funding round worth up to $2 billion from Google. Anthropic offers a large language model called Claude-2 that performs similar tasks to ChatGPT.
Nvidia Corp., a chipmaker, also emerged as a significant generative AI investor in 2023. DealBook estimates that Nvidia backed 35 funding rounds this year, almost six times more than in 2022. PitchBook believes that Nvidia is this year’s most active large-scale investor in AI, excluding accelerator funds.
While Amazon, Microsoft, Google, and Nvidia dominated the generative AI investment landscape, several other players also participated. Mistral, an LLM provider, closed a $415 million funding round led by Andreessen Horowitz and Lightspeed Venture Partners. AI21 Labs Ltd., a rival of Mistral, raised $115 million from a consortium that included Nvidia, Google, and several other investors.
Venture activity in the generative AI market slowed down during the third quarter, with a 29% decline in the number of funding rounds raised by startups. However, the value of these rounds increased due to the up to $4 billion investment secured by Anthropic from Amazon in September.
In 2024, it is anticipated that the largest players in the generative AI market will attract even more funding. OpenAI is reportedly in talks to raise new capital at a valuation exceeding $100 billion, as reported by Bloomberg. Meanwhile, Anthropic is seeking a $750 million investment at a valuation of $15 billion.
The increasing investment by tech giants in generative AI startups demonstrates their recognition of the potential of this technology. These developments are expected to shape the future of AI and impact various industries. With the continued investment and advancement in generative AI, the market is poised for further growth and innovation.
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