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As the artificial intelligence gold rush continues, valuations have soared to dizzying heights. From generative AI models that can write codes to AI-driven search engines that promise smarter answers, U.S. AI startups are raking in billions from investors eager to bet on the next money-making technological revolution.
In Q3 2024, venture capitalists poured $3.9 billion into gen AI startups across 206 deals, $2.9 billion of which went to U.S.-based companies in 127 deals, according to PitchBook, (excluding OpenAI’s $6.6 billion funding round in October).
Behind the eye-popping figures—some firms are now valued north of $10 billion—questions remain about whether these startups can sustain the hype, deliver on lofty promises, and justify their swelling price tags.
“Vanguard has hinted at a coming ‘correction,’ suggesting these valuations may be a touch too optimistic,” said Jeremy Goldman, sr. director of the marketing, retail, and tech briefings, Emarketer. “Investors are banking on constant innovation, but the road to AI dominance is paved with broken promises and beta tests.”
While AI firms are generating revenue, sky-high projections—like OpenAI’s $11.6 billion forecast for 2025—rest on the assumption of flawless execution and continuous innovation.
“Consumers have shown they’ll be willing to rely on imperfect products, but enterprises won’t necessarily pull the trigger on imperfect offerings,” said Goldman. Meanwhile, competition remains fierce, with OpenAI reportedly discouraging investors from backing rivals.
“In a world where tech dreams often collide with reality and regulators, expect a few hard landings [in 2025],” said Goldman. “The AI gold rush may yet prove fruitful, but some of these valuations are setting the stage for a very public reckoning.”
Here are some startups leading the charge—and the valuations that everyone is watching, (in price descending order).
OpenAI
Valuation: $157 billion (as of October 2024, per The New York Times)
Highlights: The world’s most highly valued AI startup is making strategic moves to secure its dominance. A $10 billion investment from Microsoft in 2023 fueled OpenAI’s rapid growth, anchored by its flagship model, ChatGPT, now integrated into Microsoft and Apple products. In 2024, OpenAI hired its first CMO and introduced ChatGPT as an AI-driven search tool, and started talking about an ad-based revenue model. ChatGPT surpassed 300 million weekly active users, OpenAI CEO Sam Altman said at DealBook Summit earlier this month. Ongoing legal battles and substantial operational costs are its core challenges heading into 2025.
Total capital raised: $17.6 billion (per Crunchbase)