AI and ADAS Venture Funding Slows

An analysis of startups reveals an overall slowdown in AI- and ADAS-chip funding. But startup funding is growing in China even as it slows elsewhere.

Joseph Byrne

When two waves overlap in phase, they combine to make a bigger one. In recent years, an AI-technology wave has proven valuable in areas as diverse as social media and driver assistance. Simultaneously, interest rates were at all-time lows, plumbing near-zero depths in 2020 and generating a cash wave flowing into venture funds as ordinarily conservative investors chased yields. These two waves combined to swell the coffers of AI, ADAS, and other chip startups.

An ocean away, other waves came together. The Chinese government set targets to domestically produce an increasing portion of the chips its electronics industry needs. Subsequently, it vowed to lead the world in AI. Meanwhile, the country’s maturing chip-development capability, roaring economy, and loosened government purse strings gave startups and investors alike the means to pursue these goals. Therefore, startup funding in China surged.

Waves are defined as much by their troughs as by their crests. While the industry is hardly at a nadir, venture funding of AI- and ADAS-chip companies has declined over the past two years. Investment in other semiconductor startups has remained steady. Funding totals are declining, although they vary by quarter. Of the total funding for these three categories, about a third went to AI companies, a little less than half to other chip startups, and the remainder to ADAS.

We base these conclusions on data collated by Semiconductor Engineering, which tallies startup funding every month, assigning companies to various groupings. We focus on three semiconductor categories: AI, ADAS, and a select group of others that most closely align with processors.