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The AI boom hasn't moved the needle on the VC funding landscape yet

AI investments may be hot, but the VC space overall remains noticeably cool, recent Crunchbase data shows.

VC funding globally shook out to nearly $22 billion in May 2023, the data reveals. While that marks a slight uptick month-over-month, it's still a jarring year-over-over decline of 44%. This funding drop comes despite a surge of investments in AI-focused companies.

The AI hype is high, to be sure, and it traces back to the release of OpenAI's ChatGPT, which gained widespread public recognition in late 2022. In the public markets, companies like Nvidia (NVDA) and C3AI (AI) have seen their shares skyrocket, and, in Nvidia's case, it's been a monumental shift – the chipmaker is now careening towards and around a trillion-dollar market cap.

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The AI hype has, predictably, translated to funding on a VC level – to an extent. There's good news, to be sure. For example, Toronto-based Cohere, which competes with ChatGPT, reportedly raised $250 million in May in a deal that values that company at $2 billion. Likewise, also in May, generative AI video platform Runway reportedly raised about $100 million in funding, valuing the company at $1.5 billion.

Likewise, big-name AI startups like Google-backed (GOOG, GOOGL) Anthropic, and AI-focused cloud startup CoreWeave raised rounds, coming in at rounds of $450 million and $421 million respectively.

However, for all the AI hype, these types of investments only accounted for 13% of total VC funding in May.

BRAZIL - 2023/04/03: In this photo illustration, the Cohere logo is displayed on a smartphone screen. (Photo Illustration by Rafael Henrique/SOPA Images/LightRocket via Getty Images)
BRAZIL - 2023/04/03: In this photo illustration, the Cohere logo is displayed on a smartphone screen. (Photo Illustration by Rafael Henrique/SOPA Images/LightRocket via Getty Images) (SOPA Images via Getty Images)

Nevertheless, there still are a few other pockets of optimism. In May, Crunchbase data shows that there were 10 newly-minted unicorns – a term for private startups valued at $1 billion or more – two of which were Cohere and Runway. Though that number is down from 34 this time last year, May's 10 new unicorns are double the number we saw in April and mark the first time since November that the new unicorn count hit the low double-digits.

However, the overall picture is one that still reads gloomy and shows that across the board, investors remain cautious – that 44% year-over-year decline is tough to shake off and a quiet VC landscape isn't new. VC investments have been down for seed, early, and late-stage startups for some time, and so far, that remains the case. The reality is this: AI is hot, but the economy isn't and, for all the excitement surrounding AI, it remains a minor part of the overall economic picture.

Allie Garfinkle is a Senior Tech Reporter at Yahoo Finance. Follow her on Twitter at @agarfinks and on LinkedIn.

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