Generative AI startups get 40% of all VC investment in cloud amid ChatGPT buzz
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Generative artificial intelligence startups are getting 40% of all the venture capital funding that flows into cloud companies, according to venture investors Accel.
In its latest annual Euroscape report, which looks at key cloud and AI trends, Accel said that venture funding for cloud startups based in the U.S., Europe and Israel is projected to rise to $79.2 billion this year, with artificial intelligence fueling much of the recovery.
Venture funding into the cloud industry climbed 27% annually — marking the first year of growth in three years. Cloud startups raised $62.5 billion in Europe, Israel and the U.S. in 2023, the report found.
Funding is up 65% from the $47.9 billion cloud firms raised four years ago, according to Accel.
It comes after OpenAI, the Microsoft-backed company behind the buzzy generative AI chatbot ChatGPT, earlier this month raised $6.6 billion in a mammoth funding round that valued the startup at $157 billion.
AI is eating software
Much of the growth of funding in cloud is being driven by excitement around AI.
“AI is sucking the air out of the room” when it comes to cloud, Philippe Botteri, partner at Accel, told CNBC in an interview this week. “This is both visible on the public market and and the private market.”
As of Sep. 30, the Euroscape index — a selection of publicly-listed U.S., European and Israeli cloud firms curated by Accel — is up 19% year-over-year.
This pales in comparison with the 38% increase the Nasdaq saw this year and is also down 39% from the Euroscape index’s peak hit back in 2021.
The cloud industry has been having a tough time beyond AI, with enterprise software budgets squeezed by macroeconomic and geopolitical risks.
“There’s a lot of uncertainty out there,” Botteri said, adding that businesses are increasingly asking questions around geopolitical tensions and macroeconomic factors, which have affected software spending priorities.
Not a single company in Accel’s Euroscape index has seen revenue growth of more than 40% per year this year, compared with 23 businesses achieving the feat in 2021.
“IT budgets are shifting towards AI,” Botteri noted. “They are still growing slightly, but they are growing a few percent year-over-year.”
“Part of it is budgets going toward genAI, building new applications, testing these new technologies, so there is less for the rest,” the VC investor added.
Foundational models in focus
The top six generative AI companies in the U.S., Europe and Israel, respectively, accounted for roughly two thirds of the funding raised by all genAI startups, according to Accel’s Euroscape report.
OpenAI raised a dominant $18.9 billion in 2023-24, taking the lion’s share of VC funding that went to U.S. genAI companies.
“When you look OpenAI and the speed at which the road to over $3 billion in revenues, this has been one of the fastest companies in software of all time,” said Botteri.
Anthropic raised the second-largest sum among U.S. genAI startups, with $7.8 billion, while Elon Musk’s xAI came in third.
In Europe, the biggest funding amounts went to Britain’s Wayve, France’s Mistral and Germany’s Aleph Alpha.
Globally, companies building so-called foundational models, which power much of today’s generative AI tools, account for two thirds of overall funding for generative AI firms, Accel said.
Big Tech’s AI splurge
The U.S. took the lead globally in terms of overall regional generative AI investment raised.
Out of the $56 billion total siphoned into genAI firms globally over 2023-24, roughly 80% of the cash went to U.S.-based firms, Accel said, also noting that Amazon, Microsoft, Google and Meta are each investing an eye-watering average $30 billion to $60 billion in AI per year.
AI “majors” like OpenAI, Anthropic and xAI are spending billions on the technology, Accel said, while smaller challengers including Cohere, H and Mistral are investing tens to hundreds of millions per year.
Dev Ittycheria, CEO of database firm MongoDB, noted that it’s likely concentration of the most powerful AI models will consolidate to only a select few players that are able to attract the necessary capital to make investments in data centers and chips to train and run their systems.
“Access to capital will profoundly impact the performance of these models,” Ittycheria said in an interview Tuesday on CNBC’s “Squawk Box.” He added: “My bet is that over time, you won’t have this many model providers, you may come down to one or two.”
OpenAI CEO Sam Altman speaks to members of the media as he arrives at a lodge for the Allen & Co. Sun Valley Conference on July 8, 2025 in Sun Valley, Idaho.
Kevin Dietsch | Getty Images News | Getty Images
OpenAI said Wednesday that it expects to use Google’s cloud infrastructure for its popular ChatGPT artificial intelligence assistant.
The reach for additional capacity aligns with OpenAI’s desire for more computing power to meet heavy demand after initially relying exclusively on Microsoft for cloud capacity. The two companies’ relations have evolved since then, with Microsoft naming OpenAI as a competitor last year.
Both companies sell AI tools for developers and offer subscriptions to companies.
OpenAI has added Google to a list of suppliers, specifying that ChatGPT and its application programming interface will use the Google Cloud Platform, as well as Microsoft, CoreWeave and Oracle.
The announcement amounts to a win for Google, whose cloud unit is younger and smaller than Amazon‘s and Microsoft‘s. Google also has cloud business with Anthropic, which was established by former OpenAI executives.
The Google infrastructure will run in the U.S., Japan, the Netherlands, Norway and the United Kingdom.
Last year, Oracle announced that it was partnering with Microsoft and OpenAl “to extend the Microsoft Azure Al platform to Oracle Cloud Infrastructure” to give OpenAI additional computing power. In March, OpenAI committed to a cloud agreement with CoreWeave in a five-year deal worth nearly $12 billion.
Microsoft said in January that it had agreed to move to a model of providing the right of first refusal anytime OpenAI needs more computing resources, rather than being its exclusive vendor across the board. Microsoft continues to hold the exclusive on OpenAI’s programming interfaces.
Sam Altman, OpenAI’s co-founder and CEO, said in April that the startup, which draws on Nvidia graphics processing units to power its large language models, was facing capacity constraints.
“if anyone has GPU capacity in 100k chunks we can get asap please call!” he wrote in an X post at the time.
Reuters reported in June that OpenAI was planning to bring on cloud capacity from Google.
WATCH: ChatGPT’s growth has been unassailed and looks set to continue: Altimeter’s Apoorv Agrawal
Technology
Tesla’s change in bylaws to limit shareholder lawsuits slammed by New York state officials
Elon Musk interviews on CNBC from the Tesla Headquarters in Texas.
CNBC
In May, Tesla changed its corporate bylaws in a way that would require investors to own 3% of the stock, today worth about $30 billion, in order to file a derivative lawsuit against the company for breach of fiduciary duties. Authorities in New York State are now asking Tesla to delete the bylaw entirely.
Overseers of the New York State Common Retirement Fund, which owns about 0.1% of Tesla’s shares, submitted a formal proxy proposal and letter to the company on July 11, and shared it with CNBC on Wednesday. They say that Elon Musk’s automaker engaged in a “bait-and-switch” to convince shareholders to approve an incorporation move from Delaware to Texas in June 2024.
Musk made the move after a judge in Delaware voided the $56 billion pay package that the CEO, also the world’s richest person, was granted by Tesla in 2018, the largest compensation plan in public company history. In getting shareholders to approve the change in its state of incorporation, Tesla said that stakeholders’ rights “are substantially equivalent” under the laws of Delaware and Texas.
On May 14, almost a year after Tesla’s move, Texas changed its law to allow corporations in the state to require 3% ownership before being able to carry forth a shareholder derivative suit.
“The very next day, Tesla’s board amended the Company’s bylaws to the maximum allowable 3% ownership threshold, effectively insulating the Company’s directors and officers from accountability to shareholders,” the New York letter says. The letter was signed by Gianna McCarthy, a director of corporate governance with the retirement fund, on behalf of the fund and New York State Comptroller Thomas DiNapoli.
Only three institutions currently own at least 3% of Tesla’s outstanding shares.
Tesla didn’t immediately respond to a request for comment.
The New York fund overseers wrote that derivative actions are “the last resort for shareholders to enforce their rights” when company directors or officers violate their fiduciary obligations, and called Tesla’s decision on the matter “egregious.”
In an email to CNBC, DiNapoli said Tesla “deceived shareholders” in assuring them that their rights would remain the same in Texas.
“These actions violate basic tenets of good corporate governance and must be reversed,” he wrote.
WATCH: What to know about the renewed executive churn under Elon Musk
Technology
Peter Thiel just bought a big stake in Tom Lee’s ether company and the shares are surging
Peter Thiel, president and founder of Clarium Capital Management LLC, holds hundred dollars bills as he speaks during the Bitcoin 2022 conference in Miami, Florida, U.S., on Thursday, April 7, 2022.
Eva Marie Uzcategui | Bloomberg | Getty Images
Bitmine (BMNR) 1-month
The current wave of interest in Ethereum and related assets follows an announcement by Robinhood that it will enable trading of tokenized U.S. stocks and ETFs across Europe, and a groundswell of interest in stablecoins throughout June following Circle’s wildly successful IPO and ongoing progress in Congress on the Senate’s proposed stablecoin bill, the GENIUS Act.
The price of ether itself also continued its rally, up more than 4% Wednesday. The coin has doubled in price in the past three months.
Thiel is a venture capitalist and hedge fund manager best known as a cofounder of both PayPal and Palantir and an early investor in Facebook. Founders Fund was an investor in Tagomi, the crypto brokerage acquired by Coinbase in 2020, and Polymarket, the prediction market built on Ethereum.
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