AI funding rises to $17.9 billion; the rest of tech falls

Oct 18
Silicon Valley has become practically accustomed to multibillion-dollar investments in firms focused on artificial intelligence. In the third quarter of 2018, funding for AI companies reached $17.9 billion, outpacing funding for all other technological sectors.

PitchBook reports that even though overall startup deal volume decreased 31% from a year earlier to $73 billion internationally in the third quarter, the cost of financing artificial intelligence firms increased 27% globally from a year earlier.
The differences between AI companies and the rest of the industry are highlighted by the opposing trend lines. AI is one of the few shining lights in the venture capital market, as rising interest rates and the post-pandemic recession have hurt investment.

The ability of so-called generative artificial intelligence technology, in particular, to produce photorealistic visuals and human-like writing in response to just a few words of prompt has astounded users and investors and has helped large firms raise billions of dollars in funding.

The rise of the consumer internet has been compared by several venture capitalists to the current AI boom. According to Praveen Akkiraju of Insight Partners, "This is the web moment, the HTML moment for generative artificial intelligence."

Similar to how the Internet took years to catch on before user-friendly interfaces made it popular, he claimed that the popularity of simple-to-use apps like OpenAI's ChatGPT is one reason why AI is expanding.

While companies like OpenAI dominate the headlines, the larger tech downturn has been overshadowed by the hype. According to PitchBook, most tech categories, including information technology equipment, healthcare services, and consumer products, are down year over year.

Even AI, though, is not impervious to startup pressure. The industry's overall funding is still smaller than it was two years ago, during the height of the epidemic tech boom, and most of its success has been attributed to major transactions for several well-known businesses, notably Anthropic and OpenAI.

The rest of the market, including corporate software, which was popular only a few years ago, has decided to wait and see, given the extent of the AI hype. Because of massive initial public offerings from firms like UiPath Inc. and Snowflake Inc., venture capitalists were talking about enterprise software during those prosperous times.

Kong Inc., a company that facilitates the management of how software programs connect, is one startup that has profited from the 2021 craze. In a deal facilitated by Tiger Global Management and involving organizations like Goldman Sachs Group Inc., Index Ventures, and CRV, the company raised $100 million at a $1.4 billion value.

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