Investors defy recession to pump $27.1 billion into AI startups

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In May, CoreWeave, a provider of cloud computing services for AI companies, raised $1.1 billion and then took on $7.5 billion in debt at a $19 billion valuation. Scale AI, a data provider for AI companies, raised $1 billion at a $13.8 billion valuation. And Elon Musk-founded xAI raised $6 billion at a $24 billion valuation.

Kyle Stanford, a research analyst at PitchBook, said these funding rounds are driving up deal value and deal count across the industry.

“It's not going down any more. The bottom has already fallen out,” he said.

In response, some venture capital investors have changed their messaging. Last year, IVP investor Tom Rabelo predicted a “mass extinction event” for startups and urged them to cut costs. Last week, he declared that era over, calling the current one a “great reawakening” and urging companies to “go all in” on growth, especially around artificial intelligence.

“The AI ​​train has left the station and you need to get on it,” he wrote to X.

The startup slump began in early 2022 as many loss-making companies struggled to grow as fast as they had during the pandemic. Rising interest rates also drove investors to seek out less risky bets. To make up for the loss in funding, startups cut staff and scaled back their ambitions.

Then, in late 2022, San Francisco AI research institute OpenAI released the chatbot “ChatGPT,” sparking a new boom. Expectations for generative AI technology that can generate text, images, and videos have sparked a frenzy of startup companies being founded and funded.

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