Global Venture Funding Drops 30% as China Helps Drag Market Down

Global venture funding drops 30% in the first quarter, extending its downward trend as investors remain cautious amid stalling economies and a sluggish market for stock-market debuts.

According to data compiled by research firm Preqin, China’s 40% drop contributed to the market’s decline, while the United States suffered a 29% dip. The total global revenue generated by startups fell to $57.8 billion in the first three months.

The data indicate that investors are concerned about slowing economies and rising inflation, as well as the impact they are having on new enterprises. Last year, global venture capital investment fell to its lowest level since 2017, despite new technologies such as generative artificial intelligence attracting money.

According to Preqin, Chinese investments in AI startups nearly doubled to $4.2 billion in the first quarter, while total VC bets declined to $11.8 billion. This is the lowest quarterly dollar total since the first quarter of 2020.

Among China’s 19 biggest acquisitions in the first quarter were two investments in up-and-coming businesses Moonshot AI and MiniMax, both worth billions of dollars.

The Chinese government has prioritized research into cutting-edge disciplines such as artificial intelligence in the next years, vowing to mobilize the entire country in an effort to minimize its dependency on Western technology. AI is of considerable interest to both Beijing and Washington due to its military and commercial potential.

Chinese IT titans ranging from Alibaba Group Holding Ltd. to Tencent Holdings Ltd., like their Silicon Valley counterparts Microsoft Corp., are developing their own huge language models while investing in startups like as Baichuan and Zhipu.

“China is banking on artificial intelligence as a way to counter economic growth hurdles, including slowing productivity growth and a declining working-age population,” said Shawn Xiong, senior analyst at Moody’s. “However, implementation requires large investment and companies face execution risks.”

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