As trade war winds swirl and countries seem poised to battle for semiconductor supremacy, global venture investment in the industry actually declined last year but bounced back for U.S.-based startups.
Global venture capital to chip startups totaled only $10.5 billion last year across 415 deals, per Crunchbase data. That dollar figure represents a 24% drop from 2023, when global venture capital in semiconductors totaled $13.8 billion. The number of announced deals also represents a 27% decline from 2023 when 571 deals were consummated.
However, chip startups in the U.S. saw significantly more love from investors, with nearly $3 billion rolling to domestic startups, per Crunchbase data. That number represents a whopping 123% jump from 2023, when investors poured only $1.3 billion to such startups.
Last year’s dollar figure was the best for U.S.-based chip startups since 2021’s record year of $3.2 billion.
Big dollars
Those U.S. numbers were helped out by a slew of massive rounds in the second half of the year, including:
- In August, AI semiconductor and software startup Groq locked up a $640 million Series D led by funds and accounts managed by BlackRock at a valuation of $2.8 billion. The Mountain View, California-based company aims to develop methods for optimizing AI and reducing the substantial computing power currently required for AI processing.
- In October, Lightmatter, a startup that uses light to link chips together and to do calculations for the deep learning necessary for AI, locked up a $400 million Series D led by new investor T. Rowe Price at a $4.4 billion valuation. The new round nearly quadrupled its previous valuation of $1.2 billion in December after a $155 million raise led by GV.
- In December, Ayar Labs raised a $155 million Series D led by Advent International and Light Street Capital at a valuation of more than $1 billion. Ayar says its optical data transmission solutions replace traditional electrical solutions, enhancing compute efficiency and performance for AI infrastructure while reducing cost and power usage.
Chip competition accelerates
Those large numbers and high total for last year would seem to make sense considering recent headlines as the U.S. tries to ramp up chip production domestically.
Just last week, Taiwan Semiconductor Manufacturing Co. — the world’s largest chip manufacturer — announced it would invest $100 billion in the United States over the next four years.
It also comes as the White House threatens to dismantle the bipartisan CHIPS Act — a 2022 statute aimed at making the U.S. less reliant on chips from Asia — as President Donald Trump promises his increased tariffs would bring chip manufacturing countryside without government incentives.
According to numbers from semiconductor lobbying organization SEMI, about 70% of total manufacturing capacity for chips is in South Korea, Taiwan and China.
As the White House wants to pull back on incentives for chip manufacturing, China just last week announced it would set aside approximately $140 billion to fund its domestic tech industries — including AI and semiconductors.
The largest rounds of the year went to two Chinese chipmakers — ChangXin Memory Technologies and SJ Semi — which in total raised about $2.2 billion in their two rounds. Other startups in China, including Unisoc and AaltoSemi, also raised huge rounds.
AI chips
Of course, the likely main driver of this chips arm race is a familiar topic: artificial intelligence.
Investors know — or should — that advancements in AI will also require advancements at the silicon and hardware level. Startups that can help maximize compute efficiency and performance as it relates to AI clearly have become attractive to VCs.
However, chipmaking and design can be expensive propositions, and it is an industry that can be hard to break through as big players such as Nvidia dominate.
Nevertheless, investors in the U.S. seem willing to place bets even amid uncertainty, hoping AI can provide a big payday.
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Illustration: Dom Guzman
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