AI startups have played a key role in reviving United States venture capital funding, with total capital raised in 2024 increasing by nearly 30% year-on-year, according to PitchBook. AI firms secured a record 46.4% of the $209 billion raised, a sharp rise from less than 10% a decade ago. The surge in investment has been driven by growing enthusiasm for AI technology, particularly since OpenAI’s ChatGPT gained widespread attention in late 2022. Major funding rounds, including $6.6 billion for OpenAI and $12 billion for Elon Musk’s xAI, highlight investor confidence in AI’s potential.
Despite the strong investment trends, analysts warn that maintaining such momentum could be challenging, especially for foundation model firms that require significant capital for computing power and expertise. Venture capital funding overall still faces hurdles, with only $76 billion raised in 2024—the lowest in five years. Exit values also remain well below their 2021 peak, although they improved from 2023’s seven-year low. While the IPO market did not recover as quickly as expected, year-end listings like ServiceTitan have provided some renewed optimism.
Hopes for a stronger IPO and M&A market are tied to the incoming administration of President-elect Donald Trump, which is expected to introduce policies favourable to technology and business. Industry experts believe more venture-backed companies could go public in the second half of 2025, helping to sustain the investment rebound. With AI continuing to dominate venture capital funding, the sector’s ability to meet ambitious business milestones will be critical to maintaining investor confidence.
Microsoft will invest $3 billion to expand AI and cloud-computing infrastructure in India, CEO Satya Nadella announced during a conference in Bengaluru. The investment, the company’s largest expansion in the country, aims to strengthen its Azure cloud services and AI capabilities. Nadella also revealed plans to train 10 million people in AI by 2030, building on an earlier commitment to provide AI skilling opportunities for two million individuals by 2025, with a focus on smaller cities and rural areas.
India’s growing importance as a tech hub has attracted interest from major US technology firms, with recent visits from Nvidia’s Jensen Huang and Meta’s chief AI scientist Yann LeCun. Nadella met Prime Minister Narendra Modi to discuss technology, innovation, and Microsoft‘s ambitious plans for expansion in the country. India’s vast population and affordable internet access make it a key market for AI-driven growth.
Microsoft is making significant global investments in AI and cloud infrastructure, committing around $80 billion in fiscal 2025. More than half of that will be directed towards US data centers to support AI model training and cloud-based applications. With India positioned as a strategic market, Microsoft’s latest investment underscores the country’s growing role in the global AI ecosystem.
US stock markets climbed to one-week highs on Monday, driven by gains in semiconductor stocks and optimism over AI investments. Reports suggesting that Donald Trump’s incoming administration may adopt a more selective approach to tariffs, rather than broad measures, also helped boost investor confidence. The Dow Jones Industrial Average rose 0.41%, the S&P 500 gained 1.02%, and the Nasdaq Composite surged 1.53%, with automakers and tech stocks leading the rally.
Semiconductor shares saw strong gains after Microsoft announced an $80 billion investment in AI-enabled data centres, while Foxconn posted better-than-expected quarterly revenue. Nvidia climbed 3.5%, AMD gained 2.8%, and Micron Technology surged 9.6%, pushing the Philadelphia Semiconductor Index to a two-month high. Meanwhile, the Russell 2000 index, which tracks small-cap companies, added 0.7% as investors weighed economic data and Federal Reserve policy signals.
Investors are closely watching monetary policy developments, with the Federal Reserve expected to provide further guidance on interest rate cuts later in the week. While Trump’s proposals could support corporate earnings and economic growth, concerns remain over potential inflationary pressures. US markets will be closed on January 9 for a national day of mourning in honour of former President Jimmy Carter.
AI-powered chatbots played a key role in boosting online sales during the 2024 holiday season, with United States e-commerce revenue rising nearly 4% year-on-year to $282 billion, according to Salesforce. Consumers increasingly relied on AI-based customer service tools for purchases and returns, with chatbot usage growing by 42% compared to 2023. Retailers also leveraged targeted promotions, product recommendations, and loyalty programmes to attract bargain hunters.
Despite the sales growth, a sharp increase in product returns emerged as a significant challenge for retailers. The return rate climbed to 28%, up from 20% in the previous year, potentially affecting profit margins. Caila Schwartz, director of Consumer Insights at Salesforce, noted that AI-driven tools would be crucial in 2025 to help retailers reduce losses from returns and retain customers. Mobile shopping remained dominant, with 79% of all orders placed via smartphones, peaking on Christmas Day as last-minute buyers made their final purchases.
Social media platforms such as TikTok Shop and Instagram also played a growing role in holiday sales, driving 14% of traffic to e-commerce sites. AI-driven sales reached $229 billion globally, an increase from $199 billion in 2023. As retailers continue to invest in digital shopping tools, the balance between AI-driven efficiency and managing high return rates will be critical for sustaining profitability in the coming years.
Demis Hassabis, CEO of Google DeepMind, has warned that the rapid progress in AI development may be slowing as companies exhaust the available digital data needed to train large language models. The industry has long relied on feeding vast amounts of online text into AI systems to improve performance, but diminishing returns are now setting in. Some experts, including OpenAI’s Ilya Sutskever, believe the industry has reached “peak data,” meaning future improvements will require entirely new approaches.
Researchers are now exploring alternative methods, such as synthetic data, where AI models generate and learn from their own outputs. While this technique has shown promise in fields like mathematics and programming, it struggles with more complex areas like philosophy and the arts, where defining correctness is difficult. OpenAI has already applied this method in its latest system, OpenAI o1, but challenges remain, particularly in preventing AI from making errors or generating misleading information.
Another possibility to overcome ‘data limitation’ in AI development is to shift focus from quantity to quality of data through better data labelling and contextual enrichment, as done by Diplo’s cognitive proximity approach (see below).
DiploAI approach to data enrichment
Tech leaders remain divided on whether AI advancements will continue at the same pace. Nvidia’s CEO Jensen Huang remains optimistic, citing strong demand for AI chips and ongoing innovation. However, some of the company’s biggest customers are preparing for a possible plateau in AI development. Despite the uncertainty, investment in AI infrastructure remains high, with firms continuing to push the boundaries of what AI can achieve.
OpenAI CEO Sam Altman has revealed that the company is losing money on its $200-per-month ChatGPT Pro plan due to unexpectedly high usage. The plan, introduced last year, provides access to an advanced AI model and fewer restrictions on OpenAI’s tools. Altman admitted that the pricing was not based on a rigorous study but was instead a personal decision.
Despite raising around $20 billion, OpenAI remains unprofitable, with estimated losses of $5 billion last year. The company is considering price increases or usage-based fees to improve financial stability. Altman also acknowledged that OpenAI requires more investment than initially expected.
The company remains optimistic about its future revenue, projecting $11.6 billion in 2025 and aiming for $100 billion by 2029. As OpenAI undergoes corporate restructuring, attracting new investors and refining its pricing strategy will be key to long-term profitability.
Avataar, a startup backed by Peak XV and Tiger Global, has launched Velocity, an AI-powered tool that generates product videos directly from a product link. The company aims to help brands create engaging promotional content at scale, competing with tech giants like Amazon and Google, who are also exploring AI-driven video solutions. By automating video production, Avataar hopes to lower costs and improve conversion rates for e-commerce businesses.
Founded in 2015, Avataar initially focused on AI-powered imagery and 3D modelling before shifting towards AI video creation. Its Velocity tool, commercially tested since September 2024, is already being used by brands such as HP, Victoria’s Secret, and Newegg. The company also offers an API, allowing businesses to integrate video generation into their platforms.
Avataar’s models are designed to ensure high-quality product representation, addressing past concerns about AI-generated content accuracy. Investor Amir Konigsberg highlighted the challenge of making AI-generated videos unique and maintaining quality at scale. With advancements in AI models, Avataar believes automated video production is now viable for mass adoption in e-commerce.
Russian President Vladimir Putin has directed the government and Sberbank, the nation’s largest bank, to deepen collaboration with China in the development of AI. The announcement, published on the Kremlin’s website, comes three weeks after Putin unveiled plans for Russia to work alongside BRICS nations and other partners to advance AI technologies. Sberbank, which leads Russia’s AI initiatives, has been tasked with fostering technological cooperation with China.
That move reflects Russia’s efforts to circumvent Western sanctions that have restricted its access to key technologies, including microchips essential for AI development. The sanctions have caused major global chip manufacturers to halt exports to Russia, creating significant hurdles for its AI ambitions.
Sberbank CEO German Gref admitted that replacing GPUs, the microchips vital to AI, remains a critical challenge for the country. By partnering with non-Western allies, Russia aims to counterbalance US dominance in the rapidly evolving AI sector, which Putin has described as a cornerstone of the 21st century.
As part of this strategy, a newly proposed AI Alliance Network will unite experts from BRICS nations and other interested states to bolster innovation and investment. However, Russia still lags behind its competitors, ranking 31st in the Global AI Index, far below leaders like the US, China, and even BRICS partners India and Brazil.
Apple has announced rare discounts on its latest iPhone models in China, offering up to 500 yuan ($68.50) off in a bid to counter growing competition from domestic rivals like Huawei. The promotion, running from 4 January to 7, applies to several iPhone models when purchased through specific payment methods, such as WeChat Pay or Alipay.
The flagship iPhone 16 Pro and iPhone 16 Pro Max, priced at 7,999 yuan and 9,999 yuan, respectively, will receive a maximum discount of 500 yuan. Meanwhile, the iPhone 16 and iPhone 16 Plus will see a 400 yuan reduction. The offer extends to older iPhone models and other products, including MacBook laptops and iPad tablets, with discounts ranging from 200 to 300 yuan.
That move comes as Apple faces a challenging environment in China, where economic pressures and intensifying competition have weighed on consumer spending. Huawei has reemerged as a formidable competitor, significantly boosting its market presence with locally-made chipsets and aggressive pricing.
While Apple briefly dropped out of China’s top five smartphone vendors in mid-2024, it regained some ground later in the year despite a slight dip in sales. By offering these discounts, Apple aims to retain its footing in the world’s largest smartphone market amid Huawei’s resurgence and a cautious economic climate.
The Chinese technology powerhouse, Alibaba, has announced substantial price cuts of up to 85% for its large language models (LLMs), including the visual language model Qwen-VL. Designed to process and interpret both text and images, Qwen-VL is tailored for enterprise use, marking a departure from consumer-facing AI tools like ChatGPT. These discounts signal a competitive push to expand AI accessibility in the enterprise sector.
The move comes amid a broader race among Chinese tech giants to dominate the AI landscape. Companies like Tencent, Baidu, Huawei, and ByteDance have launched their own LLMs, aiming to capitalise on the growing demand for advanced AI solutions. Alibaba’s decision to focus on enterprise customers has already shown results, with its Qwen models adopted by over 90,000 businesses since May.
Analysts predict these price cuts could reshape global AI accessibility, enabling smaller firms and startups to leverage cutting-edge technology. Lower costs may allow traditional industries to modernise operations, while venture capital flows into supporting technologies are expected to further fuel innovation.
The global AI race is poised to accelerate into 2025, with Chinese companies playing a central role in advancing machine reasoning and practical applications. The intensifying competition could define the future of AI development, offering more use cases across diverse industries worldwide.
