S&P Analysis: How top VCs are placing their growing AI bets

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HFA Staff
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Private Equity

Summary: Venture capital firms are doubling down on artificial intelligence investments, even as overall investment activity remains subdued.

In the first quarter, the top 35 venture capital firms announced 51 AI funding rounds, up from 31 a year earlier, according to new S&P Global Market Intelligence data and analysis. Not only was the total number up, but AI represented a larger share of firms’ total investments, increasing to one out of every five in early 2024 versus one out of every 10 in early 2023.

Key highlights from the analysis include:

  • Since 2023, top venture capital firms have participated in 91 funding rounds within the vertical AI space, which is tailored to address the challenges and requirements of a specific sector. 
  • Horizontal AI applications, which can be applied across multiple industries and use cases, attracted 76 funding rounds — and of these, only 14 rounds were for companies that also possess a foundation model. 
  • Another play for VCs is AI infrastructure, or companies that provide the nuts and bolts to build GenAI applications. As organizations’ experimentation with AI has skyrocketed, so has demand for AI tools and infrastructure. Publicly listed chip companies like NVIDIA Corp. have been among the biggest beneficiaries so far.
  • VC’s AI investments often reflect the amount of risk they are willing to take and their funding-stage specialization. Most GenAI startups are early in their journey and are being funded by VCs that also focus on early-stage investing, like Andreessen Horowitz LLC and Sequoia Capital Operations LLC. 

Please find the full analysis here: How top VCs are placing their growing AI bets | S&P Global Market Intelligence (spglobal.com) 

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The post above is drafted by the collaboration of the Hedge Fund Alpha Team.