Blog 16

The artificial intelligence and machine learning sector has cemented itself as an omnipresent and crucial element of the global economy since the turn of the millennia.

As a result, the sector has become a high priority for institutional investors, especially over the past decade. And while A.I. and machine learning startups have seen a slowdown in investments this year—alongside many other sectors—the industry has cemented itself as a top dog in the dealmaking space, as elements of A.I. have been interwoven into most aspects of daily life.

Artificial intelligence and machine learning technology encompasses a broad and ever-growing umbrella of applications. A.I. services include recommendation systems—such as Amazon, Netflix and YouTube—advanced web search engine—think Google—human speech technology—including Siri and Alexa applications—autonomous vehicles—like the technology produced by Tesla, Rivian, and Waymo—and much more.

Machine learning is often considered a subset of A.I., with its algorithms are utilized throughout many applications, including mathematical and data optimization, and is sometimes referred to as predictive analysis.

Thousands of institutional investors have devoted billions in funding to startups devoted to advancing the capabilities of A.I. and machine learning.

VC global dealmaking in the A.I. space has grown dramatically over the past decade. The sector has seen deal value rise from just under $3 billion in 2012 to about $75 billion in 2020, according to the OECD. Between 2012 and 2020, A.I. startups based in the U.S. and China took in 80% of total VC investments, while the E.U. followed with 4%, and the U.K. and Israel both took in 3%.

Then came 2021, a banner year for all VC investments across all sectors, and a record year for A.I. and machine learning startups.

A.I. and machine learnings VC deal value grew 87.2% between 2020 and 2021, from $61.4 billion in 2020 to $115 billion in 2021, according to PitchBook. VC exit value also exploded in 2021, with 475 exits in the sector accounting for nearly $209 billion, an 80% increase year-over-year. Public exits in the A.I. sector more than doubled from 33 to 72 last year.

Chinese A.I. social media platform Kuaishou and American robotic process automation software company UiPath contributed over $80 billion of this total through their IPOs. Autonomous vehicles contributed over $20 billion in exits with four SPAC exits and two IPOs, according to PitchBook.

This year, driven by persistent inflation and rising federal interest rates, investments in the A.I. and the machine learning sectors have significantly slowed. Through H1 of 2022, there have been 3,036 reported VC deals in the sector totaling $48.2 billion, representing a 21% decrease year-over-year.

VC exit activity in the sector has also lessened, falling nearly 22% to 100 exits with deal value sitting at $14.7 billion through H1 2022. Even as macroeconomic headwinds remain tenacious, institutional investors are still remaining bullish on A.I. and machine learning startups.

According to PitchBook the five largest funding rounds this year in the A.I. and machine learning sector are as follows:

• $1.2 billion Series E round in Anduril, a developer of artificial intelligence-based hardware and software technology, led by Marlinspike, Sparq Capital, and other investors.
• $625 million Series D round in Nuro, a developer of a fully autonomous, on-road vehicle intended to transform local commerce through autonomous delivery, led by Bow Capital, and other investors.
• $600 million Series F round in ContentSquare, a French developer of a digital experience insights optimization platform, led by Sixth Street Partners, SoftBank Group, and other investors.
• $580 million Series B round in Anthropic, an operator of an AI safety and research company, led by former FTX CEO Sam Bankman-Fried.
• $500 million Series D round in SandboxAQ, a developer of AI quantum software, led by Breyer Capital, First Light Capital Group, and Time Ventures.

At Linqto, we recognize the growth potential for artificial intelligence technology, and the impact it will have on every corner of the world. In fact, available for investing on Linqto’s platform is the company Cerebras Systems which builds the largest AI chips and fastest software solutions to date—empowering healthcare, financial, energy, government, and scientific computing customers.

In August 2022, Cerebras set a record as the only single system capable of training Transformer-Style Natural Language A.I. Models with 20x longer sequences, a new capability that is expected to lead to breakthroughs in natural language processing.

In the same month, Cerebras’ WSE Chip was accepted into the Computer History Museum world-renowned collection that contains technology of the past, present, and future. Also recently, Cerebras announced its continued global expansion with the opening of a new office in Bangalore, India.

The A.I. and machine learning sector has firmly established itself as a critical investment priority for institutional investors, and as the industry continues to influence nearly every facet of the global economy, it appears as if its ceiling may be as boundless as the technology that propels it.