In May, CoreWeave, a provider of cloud computing services for AI companies, raised $1.1 billion, followed by $7.5 billion in debt, at a valuation of $19 billion. Scale AI, a data provider for AI companies, raised $1 billion, at a valuation of $13.8 billion. And xAI, founded by Elon Musk, raised $6 billion, at a valuation of $24 billion.
These funding rounds have increased the overall deal volume in the industry, both in terms of dollar amount and number of deals, said Kyle Stanford, research analyst at PitchBook.
“It's not declining anymore,” he said. “The bottom has already fallen out.”
The activity has prompted some venture capitalists to change their messaging. Last year, IVP investor Tom Loverro predicted a “mass extinction event” for startups and urged them to cut costs. Last week, he declared that era was over and dubbed this time the “Great Awakening,” encouraging companies to “gas” growth, especially around artificial intelligence.
“The AI train is leaving the station and you need to get on it,” he wrote on X.
The startup crisis began in early 2022, when many loss-making companies struggled to grow as fast as they did during the pandemic. Rising interest rates also pushed investors to look for less risky investments. To compensate for the decrease in funding, startups cut staff and scaled back their ambitions.
Then, in late 2022, OpenAI, a San Francisco AI lab, sparked a new boom with the release of its ChatGPT chatbot. The excitement over generative AI technology, which can produce text, images, and video, has sparked a frenzy of startup creation and funding.