It’s secure to say that VCs struck whereas the iron was scorching this yr the place it involved generative AI.

Whereas enterprise capital investments total fell in comparison with final yr due to macroeconomic challenges and different associated components, startups within the generative AI house — and AI extra broadly — did fairly nicely.

Funding for AI-related startups surpassed $68.7 billion in 2023, in accordance with PitchBook, with generative AI distributors like OpenAI, Stability AI and Anthropic accounting for a considerable portion of that determine. And it seems that the sector will possible shut the yr with considerably increased investments than the previous couple of years.

However might the top-level numbers be deceptive?

A report on AI funding in Q3 by PitchBook, launched this morning, discovered that “mega-deals” (i.e., multi-hundred-million-dollar investments from big-name backers) vastly inflated deal totals this yr.

For instance, just some months in the past, Amazon pledged to speculate as much as $4 billion in Anthropic, the corporate growing the AI-powered chatbot Claude. OpenAI secured a $10 billion funding from Microsoft (albeit not unexpectedly and partly within the type of cloud compute credit). Inflection AI, a agency creating what it describes as extra “private” AI assistants, raised $1.3 billion in a funding spherical led by Microsoft. The checklist goes on.

In Q3, VC funding inclusive of mega-deals totaled round $22.1 billion. However after subtracting the tech-giant-led tranches secured by generative AI startups, the overall is nearer to $15.1 billion for the sector.