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Data Shows AI Deals Drive US Venture Capital Funding to Its Highest Level in Two Years, According to ET Telecom

Analysis of Surge in U.S. Venture Capital Funding in Second Quarter

Venture capital funding in the United States has reached new heights, with a staggering $55.6 billion raised in the second quarter, the highest quarterly total in two years. This surge, as reported by PitchBook data, represents a 47% increase from the previous quarter’s $37.8 billion.

The significant investments driving this growth are primarily in artificial intelligence companies, with Elon Musk’s xAI raising $6 billion and CoreWeave raising $1.1 billion. Investors are increasingly eager to invest in AI technology, anticipating significant returns.

Following a decline in VC funding from a record high of $97.5 billion in the fourth quarter of 2021 to a low of $35.4 billion in the second quarter of 2023, the recent influx of capital into AI startups has sparked a resurgence in funding. This has led to increased investments in AI foundation model companies and applications across various industries.

Despite the rise in deal activity, exits remain challenging, with small deals generating $23.6 billion in exit value in the second quarter, down from $37.8 billion in the first quarter. The IPO market has also struggled to gain momentum, hindering VC returns.

PitchBook analyst Kyle Stanford emphasized the need for large tech companies to go public at a higher pace to boost VC returns. Emerging VC fund managers have faced pressure due to a lack of proven returns, with only $37.4 billion in commitments raised in the first half of the year.

While large firms like Andreessen Horowitz have closed new funds exceeding $7 billion, the industry awaits more companies to go public and drive further growth in the VC ecosystem.

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