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In the first half of 2024, artificial intelligence (AI) has emerged as a dominant force in the European venture capital VC landscape, securing a substantial 6.3 billion euros, or approximately $6.8 billion in deal value.

According to PitchBook’s “European Venture Report,” the surge in AI investments propelled the sector to become the second most active industry in the European VC market, trailing only Software as a Service (SaaS) but surpassing cleantech.

AI deal values in the second quarter of this year also doubled quarter-over-quarter to €4.2 billion ($4.59 billion), indicating a growing investor appetite for AI-focused ventures.

During the same period, half of the top 10 venture capital deals in Europe involved AI-related companies, including DeepL, Black Semiconductor, and H Company. This surge of interest in AI pushed the total deal value in the sector to €6.3 billion in the first half of the year, surpassing the figures from the same period in 2023.

While the peak level of AI deal activity occurred in Q1 2022 at €4.7 billion ($5.1 billion), the current trend indicates a shift towards fewer deals but with significantly higher valuations.

The United Kingdom is leading the charge in AI, boasting the highest number of VC-backed AI and machine learning (ML) companies at 1,319, more than double the number in France, which holds the second-highest count. 

While investment in AI startups is flourishing, the report emphasizes that the growth trajectory will be significantly influenced by the availability of adequate infrastructure and the establishment of robust regulatory frameworks.

In a landmark move, the European Union (EU) approved the EU AI Act in May, marking the first comprehensive legislation for AI globally. This regulatory framework is expected to play a pivotal role in shaping the development and adoption of AI technologies across Europe. However, concerns have been raised that the EU’s focus on regulation might stifle innovation compared to approaches in the United States and China.

The report also notes that infrastructure, including data centers for training AI models and access to diverse datasets, will be crucial in supporting the continued growth of the AI sector in Europe.

This trend isn’t unique to Europe, as other jurisdictions, such as the US, have also witnessed significant funding directed towards AI startups. In fact, VC funding in the US reached $55.6 billion in the second quarter, partially fueled by investments in AI.

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