As global trade tensions rise and nations vie for semiconductor dominance, worldwide venture capital investment in the chip industry experienced a significant decline last year. However, U.S.-based semiconductor startups bucked the trend, securing a substantial increase in funding.
Global Semiconductor Investment Sees Decline
According to Crunchbase data, global venture capital investment in semiconductor startups totaled $10.5 billion in 2024 across 415 deals—a 24% drop from the $13.8 billion recorded in 2023. The number of deals also fell by 27% compared to the 571 transactions made in 2023. This downward trend highlights the impact of economic uncertainty and shifting trade policies on global chip investments.
US Chip Startups Secure Major Funding Gains
While global investment dipped, U.S.-based semiconductor startups saw a sharp rise in funding, attracting nearly $3 billion—marking a staggering 123% increase from the $1.3 billion raised in 2023. This surge represents the highest funding level since the record-breaking $3.2 billion in 2021.
Major Funding Rounds Drive Growth
Several high-value funding rounds in the second half of 2024 contributed to this surge, including:
- Groq (August 2024): The AI semiconductor and software startup secured a $640 million Series D round led by BlackRock, bringing its valuation to $2.8 billion. The Mountain View, California-based company focuses on optimizing AI processing by reducing computing power demands.
- Lightmatter (October 2024): This startup, which leverages photonics to interconnect chips and enhance AI processing, raised $400 million in a Series D round led by T. Rowe Price at a $4.4 billion valuation. This marks a significant leap from its previous $1.2 billion valuation after raising $155 million in December 2023.
- Ayar Labs (December 2024): Specializing in optical data transmission to improve AI infrastructure efficiency, Ayar Labs secured $155 million in a Series D round led by Advent International and Light Street Capital, pushing its valuation above $1 billion.
Rising Competition in the Semiconductor Industry
The sharp increase in U.S. semiconductor funding aligns with ongoing efforts to boost domestic chip production. Just last week, Taiwan Semiconductor Manufacturing Co. (TSMC)—the world’s largest chip producer—announced a $100 billion investment in the U.S. over the next four years.
However, these advancements come as political debates intensify over government incentives for chip manufacturing. While the CHIPS Act—a bipartisan 2022 law aimed at reducing reliance on Asian-made semiconductors—has played a crucial role in funding U.S. chipmaking, recent political shifts may threaten its continuation. Former President Donald Trump has proposed increasing tariffs to bring semiconductor manufacturing stateside without government subsidies.
Meanwhile, China is ramping up its efforts, setting aside approximately $140 billion to support its domestic tech industries, including AI and semiconductor manufacturing. Notably, the largest chip funding rounds of 2024 were secured by Chinese firms, including ChangXin Memory Technologies and SJ Semi, which collectively raised about $2.2 billion. Other Chinese semiconductor startups, such as Unisoc and AaltoSemi, also attracted significant funding.
AI Driving Semiconductor Investment
The surge in semiconductor investment, particularly in the U.S., is largely driven by the explosive demand for AI chips. As AI technology advances, it requires more powerful and efficient processors, making semiconductor innovation a crucial battleground for investors.
Despite the high costs and barriers to entry in chip manufacturing—where established giants like Nvidia dominate—venture capitalists are increasingly betting on startups that can revolutionize compute efficiency and performance for AI application.
While global semiconductor funding has dipped, the U.S. chip sector remains a hotbed for investment, particularly as AI continues to shape the industry. As geopolitical and economic factors evolve, the race for semiconductor supremacy will likely intensify, with both governments and private investors playing key roles in shaping the future of chip technology.
