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Venture capital funding in the United States reached $55.6 billion in the second quarter, fueled by substantial investments in artificial intelligence (AI) startups.

That total amount, reported by capital markets resource PitchBook, represents a 47% increase from the $37.8 billion in the previous quarter. The number also marks the highest quarterly total in two years.

Despite the record, this significant funding was spread across only 3,108 transactions, marking the lowest number since the second quarter of 2020, according to PitchBook data.

Venture capital spending amount in AI startups was led by Elon Musk’s xAI, which raised $6 billion from investors including Andreessen Horowitz (a16z). CoreWeave, an AI cloud-computing company backed by chipmaker Nvidia, also raised a significant amount to the tune of $1.1 billion. These substantial investments in AI startups have reversed a downward trend that began after a peak of $97.5 billion in Q4 2021.

The robust investments in AI, particularly in code generation and productivity tools, highlight a burgeoning market interest in the transformative potential of the revolutionary technology.

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However, this funding boost was concentrated among a small number of large AI transactions, suggesting that a handful of deals are skewing the overall picture. The broader fundraising environment remains somewhat subdued, with US venture funds raising $37.4 billion across 255 funds in the first half of the year, a modest increase from the previous year. A significant portion of this capital went to a few major players, including a16z, Norwest Venture Partners, and (Technology Crossover Ventures) TCV.

Despite the positive funding trend, exits for startups remained challenging. The total value of exits, including acquisitions and initial public offerings (IPOs) in Q2 2024 was $23.6 billion, a decline from $37.8 billion in Q1 2024. However, this figure represents an increase of nearly $2 billion compared to the first quarter and is more than triple the value from the same quarter a year earlier.

The global venture capital scene also witnessed an upward trend in the second quarter, driven by a few significant transactions. Global investment activity totaled $94.3 billion, a nearly 11% increase compared to the same period last year.

Venture capitalists raised $80.5 billion across 632 funds, indicating a healthy appetite for investment opportunities.

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