CB Insights: Decrease in Global Investment in AI Companies

Although there is not a day that goes by without us being inundated with AI news and new AI experts, and despite the fact that generative artificial intelligence models are becoming increasingly better, global funding for such companies has decreased in the first quarter of this year to 5.4 billion dollars, which is a 43 percent decrease compared to the previous quarter, according to the analytical firm CB Insights.

According to data from this analytical firm, this is the lowest quarterly investment amount in artificial intelligence since the first quarter of 2018. Moreover, as if that were not enough, the number of investments in artificial intelligence has decreased for the fourth consecutive quarter, to 554 investments, which is the lowest number of investments since the fourth quarter of 2017.

As for the investment amounts themselves, they have also significantly decreased. The average investment amounts in companies engaged in artificial intelligence this quarter was only 25 million dollars, which is less than half of the average investment amount in 2022. Interestingly, even during the pandemic, the investment amounts were much higher. The reason for this is that in the first quarter of 2023, there were only eight investments of 100 million dollars in companies engaged in artificial intelligence, which is the lowest number of such investments since 2019.

Where Investments Are Made

Companies developing artificial intelligence on American soil, meaning headquartered in the USA, raised only 3.7 billion dollars in the first three months of this year, which is a significant drop of 27 percent compared to the last three months of the previous year. However, it is interesting that AI companies strictly from Silicon Valley saw an increase in investments in the first quarter of this year by 41 percent as well as a 20 percent increase in the number of investments. This growth came solely due to a few large investments, exceeding 1.2 billion dollars, allocated to a smaller number of generative AI companies in Silicon Valley.

Funding for AI companies headquartered in Asia has also fallen to the lowest level since the fourth quarter of 2016 due to unexpectedly weak Chinese investments in artificial intelligence in recent months. European funding has also decreased, but it remains above the pre-pandemic average.

Mergers and Acquisitions

Regarding acquisitions of AI companies, there were 75 mergers and acquisitions in the first quarter of 2023, which is an increase of 12 percent compared to the last quarter of 2022 but fewer than the number of mergers and acquisitions in 2021. IPOs of AI companies remain rare, with only two companies launching an IPO in the first three months of this year, while none launched a SPAC. In terms of IPOs, EU companies had the largest share of IPOs at 38 percent, followed by AI companies from the USA at 33 percent and Asia at 17 percent.

Three of the five largest funding rounds in the first three months of this year went to companies engaged in generative artificial intelligence. Additionally, as noted by CB Insights, five new AI unicorns emerged, three of which are from generative artificial intelligence: Anthropic, Adept, and Character.AI. Of the five new unicorns, three are located in the USA, one in Israel, and one in Germany. The USA accounts for 64 percent of all 170 AI unicorns in the world.