Last year for the first time ever, the U.S. share of global artificial intelligence startup funding deals fell to less than half the world's total.
- The U.S. was home to nearly 75% of all deals in 2013, data shows, but is fast losing share in the startup market — a key driver of innovation.
Why it matters: AI is a major growth force for American companies and "of paramount importance to maintaining the economic and national security of the United States" President Trump said in an executive order signed in February dubbed the "American AI Initiative."
- However, Trump's order allocated no new federal funding toward AI research and development, only calling on federal agencies to prioritize existing funds toward AI projects.
The big picture from Axios emerging tech reporter Kaveh Waddell: The U.S. had a head start in commercializing AI, thanks to unmatched talent and eager VC money.
- But the number of startups in the U.S. has been relatively flat since the financial crisis — in part because Big Tech quickly snaps up the most promising shoots — while AI startups in Europe and especially China have flared into prominence, driven by their governments' concerted strategic planning to dominate in AI.
What's happening: In addition to the Chinese government allocating significant spending to AI, more new companies are being started in a raft of different countries and raising equity, analysts from CB Insights tell Axios in an email.
- In 2013, there were only around 20 AI startups in countries outside the U.S. that raised funding, data shows. In 2019, there are more than 60.
Yes, but: The total amount of funding is still tilted heavily toward the U.S. — with the exception of a handful of Chinese mega-companies like TikTok owner ByteDance, which is the top-funded AI startup in the world. The U.S. funding lead is likely to continue because of its concentration of AI experts.
- Many U.S. startups "have graduated from the seed-funding stage and entered later stages such as expansion and pre-IPO," says Joy Dantong Ma, an analyst at the Paulson Institute. "Funding in these later stages tend to be more sizable."
ICYMI: AI startups generated their highest level of funding ever in this year's second quarter, $7.4 billion, CB Insights' data shows.