Global AI transaction volumes reached 1,245 in the third quarter of 2024, a level not seen since the first quarter of 2022, reflecting investor confidence and resilience in investing in AI.

With growth of 24% year-on-year, global AI contracts have far exceeded the -10% decline quarter-over-quarter (QoQ) across the entire investment market. CB Insights notes in its State of AI Q3’24 report that despite broader venture capital trends slowing, investor resilience and confidence in AI stay strong.

CB Insights states that “although AI deals in Q3 2024 included massive rounds of over $1 billion with defense technology provider Anduril and AI laboratory Safe superintelligenceglobal AI funding actually fell 29% from the previous quarter. The 77% drop in funding from over $1 billion in AI QoQ rounds contributed to the 29% QoQ decline.

The average AI deal size increased 28% this year, from $18.4 million in 2023 to $23.5 million. The gains in deal size this year are driven by five funding rounds of more than $1 billion this year, including xAI $6 billion Series B at a $24 billion valuation, Anthropic $2.8 billion Series D at a valuation of $18.4 billion, of Anduril $1.5 billion Series F at a valuation of $14 billion, G42 A $1.5 billion investment from Microsoft and by CoreWeave $1.1 billion Series C at a valuation of $19 billion. CB Insights notes that these deals alone are not responsible for the increase in the average, mentioning that the median AI deal size has increased by 9% in 2024 so far.

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

Generative AI and Sector-Specific AI Lead Investments

The anticipated productivity gains and potential cost reductions that generative AI and sector-specific AI bring are critical to investor confidence and driving more AI deals.

Companies have already learned to prioritize AI generation and broader AI investments that deliver measurable value at scale. This is one of the main factors that continues to fuel more venture capital investments compared to other opportunities. Gartner Generative AI Planning Survey 2024 reflects senior management’s impatience with results, consistent with CB Insight’s findings.

One of the key findings of the Gartner survey is that senior executives expect – and drive – generational AI projects to increase productivity by 22.6%, outpacing revenue growth by 15%. .8% and cost savings of 15.2%. While profitability and revenue gains are important, Gartner predicts that the most immediate and substantial impact will be on greater operational efficiency. Gartner predicts that companies that prioritize AI generation integration will experience a significant increase in workflow optimization and financial performance.

CB Insights provides comprehensive analysis of deals closed in the third quarter, reflecting the growing dominance of generation AI and sector-specific AI investments. The following offers support this conclusion:

Gen AI investments in Q3:

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

Industry-specific AI investments in Q3:

• Anduril, an AI-powered defense technology company, raised $1.5 billion in a Series F round, highlighting interest in AI for national security applications.
• ArsenalBio secured $325 million for AI in biotechnology 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 raised $200 million for AI-powered women’s health apps.

New AI unicorns more than doubled in the third quarter

Generation AI continues to be one of the primary catalysts for the formation and growth of unicorns (private companies valued at over $1 billion). CB Insights found that the number of unicorns more than doubled from the previous quarter, reaching 13 in the last quarter. This represents 54% of the total projects at large for the third quarter of 2024.

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

Generation AI’s business challenges are just beginning

The potential of generational AI and sector-specific AI to improve productivity, help generate new revenue streams and reduce costs allows investors to remain resilient and focused on results.

From the many organizations securing additional late-stage funding to startups and new unicorns, the challenge will be achieving adoption at scale and robust enough to maintain recurring revenue while reducing costs.

As CIOs and CISOs look to reduce the proliferation of tools and applications they already have, the most successful startups will need to find new ways to integrate AI generation into existing applications and workflows. This is going to be a challenge as every business faces data management challenges, siled legacy systems, and the need to update strategies for data accuracy, quality, and security.

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