Artificial intelligence (AI) continues to be a lucrative technology space with the majority of startups either managing to secure venture capital (VC) backing or being involved in the thick of merger and acquisition (M&A) deal activity during 2014-2018. As a result, the race to fund or acquire AI-startups reflects the impact AI can have across various industries, says GlobalData, a leading data and analytics company.

An analysis of GlobalData’s Financial Deals Database reveals that the AI space witnessed growth in VC funding and M&A activity both in terms of volume and value during 2014-2018.

VC funding volume and value increased at a compound annual growth rate (CAGR) of 22.6% and 62.7%, respectively, during the review period. M&A volume increased at a CAGR of 37.6% during the same period, with growth witnessing across all the years. Meanwhile, M&A deal value declined in 2017 after registering growth in two consecutive years 2015 and 2016. However, it again registered massive ~190% growth in 2018.

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American and European tech companies played a prominent role in the M&A activity, with the likes of Microsoft and Accenture emerging as prominent acquirers in 2018. Microsoft acquired Semantic Machines and Lobe Artificial Intelligence; Apple acquired Silk Labs and Asaii; and Google acquired AI-powered chatbot startup, Onward, in 2018. On the other hand, Accenture acquired big data and AI services provider Kogentix and an AI technology from Real Time Analytics Platform last year.

Of the top five VC funded companies in the AI space during the review period, Sensetime, Horizon Robotics, Megvii Technology (Face++) and Yitu Technology were from China. While these four companies collectively raised ~$4bn, Zoox – the only non-Chinese company to make it to the list of top five VC funded companies – raised $0.7bn.

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Aurojyoti Bose, Financial Deals Analyst at GlobalData, says: “AI-based technologies will play a critical role across various industries and business functions in the near future and will continue to draw significant investments from VC firms. As a result, major IT companies are also investing in this space to embed AI technologies in their existing solutions or new offerings.”