As the global semiconductor industry faces rising trade tensions and competition, U.S.-based chip startups are experiencing a surge in funding. Despite a 24% drop in global venture capital for chip startups in 2024, U.S. startups have attracted significant investment, marking a 123% increase compared to the previous year.

In total, global venture capital in semiconductor startups amounted to $10.5 billion in 2024, spread across 415 deals. This represents a decline from $13.8 billion across 571 deals in 2023, according to Crunchbase data.

However, U.S. chip startups saw a much brighter picture, attracting nearly $3 billion in funding. This marks a significant 123% jump from the $1.3 billion invested in 2023. The total funding in 2024 was the highest for U.S.-based chip startups since 2021 when they received $3.2 billion.

Big Investments Drive Growth in US Chip Startups

Several large funding rounds helped push the U.S. numbers higher, especially in the second half of the year:

• In August, Groq, an AI semiconductor startup, raised $640 million in a Series D round, led by BlackRock, at a $2.8 billion valuation. The company focuses on optimizing AI and reducing the computing power needed for AI processing.
• In October, Lightmatter secured a $400 million Series D round, led by T. Rowe Price, at a $4.4 billion valuation. The company uses light to connect chips for deep learning tasks in AI.
• In December, Ayar Labs raised $155 million in a Series D round, led by Advent International and Light Street Capital. The company’s optical data transmission technology enhances AI infrastructure efficiency while reducing costs and energy use.

US Semiconductor Industry Grows Amid Global Competition

The rise in funding for U.S. chip startups comes as the U.S. government works to boost domestic semiconductor production. Taiwan Semiconductor Manufacturing Co. recently announced a $100 billion investment in the U.S. over the next four years.

This comes on the heels of the White House pushing for the dismantling of the CHIPS Act, a 2022 law aimed at reducing U.S. reliance on Asian chipmakers. At the same time, China is ramping up its own semiconductor efforts, with a $140 billion investment in tech industries, including AI and semiconductors.

In 2024, Chinese chipmakers ChangXin Memory Technologies and SJ Semi raised a combined $2.2 billion in funding. Other Chinese startups like Unisoc and AaltoSemi also secured significant investment.

AI’s Role in the Semiconductor Boom

The increasing demand for artificial intelligence (AI) has been a major driver of the semiconductor arms race. As AI technologies advance, the need for more efficient chips becomes even more critical. U.S. chip startups focusing on AI optimization are attracting the attention of investors.

While chipmaking and design are capital-intensive, and competition from industry giants like Nvidia remains fierce, U.S. investors are betting on the growth of AI and its need for specialized chips, making it a promising area for investment.

The spike in funding to U.S. chip startups highlights the growing importance of semiconductor innovation, particularly in the AI space. Even amid global uncertainty, investors are eager to support U.S. startups with the potential to lead in AI-driven hardware advancements.