In May, CoreWeave, a cloud computing provider for AI companies, raised $1.1 billion, followed by $7.5 billion in debt, valuing it at $19 billion. Scale AI, a data provider for AI companies, raised $1 billion, valuing it at $13.8 billion. And xAI, founded by Elon Musk, raised $6 billion, valuing it at $24 billion.
These funding rounds have boosted the industry’s overall deal volume in terms of dollar amount and number of deals, said Kyle Stanford, research analyst at PitchBook.
“The situation has not deteriorated any further,” he said. “The bottom has already been hit.”
The activity has prompted some venture capitalists to change their messaging. Last year, IVP investor Tom Loverro predicted a “mass extinction” for startups and urged them to cut costs. Last week, he declared that era was over, calling this time the “Great Awakening,” encouraging companies to “add fuel to the fire” for growth, particularly around artificial intelligence.
“The AI train is leaving the station and you need to be on board,” he wrote on X.
The startup slowdown began in early 2022, as many loss-making companies struggled to grow as quickly as they had during the pandemic. Rising interest rates also pushed investors to seek out less risky investments. To compensate for the reduced funding, startups cut staff and scaled back their ambitions.
Then, in late 2022, OpenAI, an artificial intelligence lab in San Francisco, kicked off a new boom with the release of its chatbot ChatGPT. The excitement over the generative AI technology, which can produce text, images and video, has sparked a frenzy of startup creation and funding.
