Venture capital investment in AI doubled to US$12 billion in 2017

Artificial intelligence, particularly its applications in health, finance and the automotive sector, attracted US$12 billion of investment from venture capitalists globally last year, double the volume in 2016, according to a report by KPMG.

AI pushed total venture capital (VC) investment in China to a record high of US$40 billion in 2017, up 15 per cent from the previous year.

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China accounted for five of the world’s 10 biggest venture capital investments in the fourth quarter, the data released on Thursday shows. And more of the companies receiving the financing are electing to plough that money into AI development.

Didi-Chuxing, China’s top ride-hailing company, received US$4 billion in a round of fundraising led by Softbank in December, in part to enhance their AI capabilities. That was the largest venture capital investment globally in the fourth quarter.

In October, China’s biggest on-demand internet service provider Meituan-Dianping also announced US$4 billion in funding led by Tencent Holdings, an existing investor. The capital would be spent on improving offline services and AI technology, the company said.

And in early November, Chinese electric vehicle start-up Nio raised more than US$1 billion in its latest fundraising round, also led by Tencent as an existing investor. The company last month launched its first model, the ES8 SUV, with an internal AI-driven personal assistant installed.

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The remaining five top 10 deals were in the United States, according to the report.

Meanwhile, the number of deals continued to decline globally during the fourth quarter.

“Rather than invest in a myriad of different companies, investors at all deal levels have leaned toward placing bigger bets on a smaller group of companies they feel have the strongest path to profitability/potential,” the report said.

Irene Chu, partner and head of technology for Hong Kong, KPMG China, said: “Chinese investors are focused on rapidly scaling and gaining market share so that they can quickly dominate the market. “This is why we are seeing bigger acquisitions – many driven by China’s biggest tech giants, as they look to take out their competition in different areas.”

The venture capital market is expected to remain robust, particularly in areas such as AI, biotechnology, and so-called autotech, the report said.