The big news in artificial intelligence recently has been the massive $40 billion OpenAI deal, backed by SoftBank. This deal has sparked considerable buzz, but a deeper analysis of AI funding in the first quarter of 2025 suggests that investor interest may be cooling. Questions are rising about how much larger enterprises will continue investing in AI tools going forward.

Private Market

As highlighted in our Q1 2025 global venture funding report, AI funding has once again reached impressive numbers, similar to Q4 2024. In Q1, AI startups raised nearly $60 billion, a figure that seems significant at first glance. However, two-thirds of this total is attributed to OpenAI’s massive investment, making it somewhat misleading. Without that large deal, AI startups raised about $19.6 billion, which is less than half of the $44 billion invested in Q4 2024.

The largest funding round of Q1, aside from the OpenAI deal, was Anthropic’s $3.5 billion round, which valued the company at $61.5 billion. While there were several substantial deals in Q4, including Databricks’ $10 billion raise and OpenAI’s $6.6 billion round, Q1 saw fewer deals of similar size, with only five rounds over $500 million compared to 11 in Q4.

This drop in funding is significant, and if we look at the broader picture, Q1 2025 saw the lowest quarterly total since AI startups raised only $13.9 billion in Q1 2024. Additionally, deal flow in Q1 dropped by around 25%, with 1,226 deals announced compared to the previous year.

Public Market

The AI space also faced challenges in the public market during Q1. Nvidia, a leader in AI technology, experienced a 20% decline in its stock price. Similarly, semiconductor giant AMD saw its shares drop by nearly 15%, and Oracle, a key player in the U.S.’s new AI initiative, The Stargate Project, saw a decrease of over 15%. The Nasdaq Composite Index, which tracks tech stocks, also fell by about 10% during the quarter.

In addition, the much-anticipated IPO of CoreWeave, a company in the AI space, barely made a ripple, with its stock price remaining relatively flat after its launch.

Cautious Investing

CoreWeave’s IPO, which had been seen as a potential indicator of a recovery in the IPO market, illustrates the cautious sentiment among investors. As the IPO approached, concerns grew over the speed of AI adoption by large companies and their willingness to invest in data centers. There is also fear that an oversupply of data centers could lead to lower prices, further impacting investment returns.

Looking ahead to Q2, the outlook for both private and public AI markets could shift. While the OpenAI deal is a notable example of ongoing investment, there are growing signs that investors may be becoming more discerning about where they allocate their funds in the AI space.

The slowing trend in AI investment could signal a change in market dynamics, with a more cautious approach moving forward. However, the future remains uncertain, and Q2 may bring new opportunities and challenges for AI startups and investors alike.