Artificial intelligence startups have contributed significantly to the recovery of U.S. venture capital funding from market lows. According to data from PitchBook published recently, the total capital raised in 2024 is nearly 30% higher year-on-year.

Notably, AI startups captured a record 46.4% of the total $209 billion raised last year, a dramatic increase from less than 10% just a decade ago.

This surge in interest is primarily attributed to the breakout success of OpenAI’s ChatGPT since late 2022, which has rejuvenated investment in the sector amid searches for true valuations in a landscape shaped by rising interest rates.

AI has captivated investors, securing substantial funding, including remarkable rounds such as $6.6 billion for OpenAI and $12 billion for Elon Musk’s xAI. Despite many of these companies being unprofitable at present, investor optimism about AI’s potential remains high.

Nevertheless, analysts express caution. James Cross, managing director at Franklin Venture Partners, remarked, ‘The AI/LLM companies did enjoy a historically rich funding environment. They will need to smash very significant business milestones this year to continue enjoying unlimited access to infinity capital.’

In terms of overall venture capital funds, approximately $76 billion was raised in 2024—marking the lowest total in five years. Major funds, such as Andreessen Horowitz and General Catalyst, continue to play significant roles in this landscape.

Exits for venture investments also remain a challenge. The exit value for 2024 was reported at $149.2 billion, a notable improvement from the seven-year low of $120 billion in 2023 but still considerably below 2021’s peak of $841.5 billion.

The overall IPO market did not recover as anticipated; however, some listings, like ServiceTitan, have sparked newfound optimism. As the incoming administration of President-elect Donald Trump prepares for tech-driven policies, speculation grows regarding a potential uptick in mergers and acquisitions and IPO activities.

Brijesh Jeevarathnam, global head of fund investments at Adam Street Partners, commented on the outlook: ‘With the caveat that 2024 and 2023 were so anemic with exits, it’s hard not to see upside from there.’ He projects more VC-backed companies will seek listings in the second half of 2025.