In a remarkable defiance of the broader startup downturn, Artificial Intelligence (AI) startups have seen an influx of funding. Investors have poured a staggering $27.1 billion into AI startups in the United States from April to June, accounting for nearly half of all US startup funding in that period. This has led to the highest three-month haul in two years, with US startups raising a total of $56 billion, up 57 percent from a year earlier.
Several AI companies have attracted huge rounds of funding. CoreWeave, a provider of cloud computing services for AI companies, raised $1.1 billion, followed by $7.5 billion in debt, valuing it at $19 billion. Scale AI, a provider of data for AI companies, raised $1 billion, valuing it at $13.8 billion. And xAI, founded by Elon Musk, raised $6 billion, valuing it at $24 billion.
This surge in funding has prompted some venture capital investors to change their stance. Last year, Tom Loverro, an investor at IVP, predicted a “mass extinction event” for startups and encouraged them to cut costs. However, he recently declared that era over and christened this time the “Great Reawakening,” encouraging companies to “pour gas” on growth, particularly around artificial intelligence.
The startup downturn began in early 2022 as many money-losing companies struggled to grow as quickly as they did in the pandemic. Rising interest rates also pushed investors to chase less risky investments. To make up for dwindling funding, startups slashed staff and scaled back their ambitions. Then in late 2022, OpenAI, a San Francisco AI lab, kicked off a new boom with the release of its ChatGPT chatbot. The excitement around generative AI technology, which can produce text, images, and videos, set off a frenzy of startup creation and funding.
This surge in funding for AI startups is not only reshaping the tech industry but also raising questions about the future of AI and its impact on society. As AI continues to evolve, the need for ethical guidelines and regulations becomes increasingly apparent.
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