While Europe is currently shaping the world's first comprehensive regulatory framework for artificial intelligence, a study indicates that the region is losing ground in global AI funding distribution. According to the "State of AI Report 2023" by the London-based venture capital firm Air Street Capital, venture capital investors have invested $3.4 billion in EU-based AI companies so far this year, a significant drop from nearly $9 billion in the previous year. The study authors based their analysis on data from the information provider Dealroom.

Although this year is not yet over, the region lags significantly behind the United States and the United Kingdom, where current investments of almost $38 billion and $3.6 billion respectively have already exceeded the entire previous year's funding. As a result, the share of both countries in global AI investments has increased: the US recently accounted for 74% of all AI funds, up from 54% in the previous year. In the UK, the share increased from 5.5% in 2022 to 7% this year. In the EU, the share shrank from almost 14% in the preceding year to just under 9%.

With increased investments, both the UK and the US have heightened their number of so-called AI unicorn companies, which are startups valued at over $1 billion. In the US, the count grew from 307 last year to 316 currently, while in the UK, the number increased from 23 to 26.

In the European Union, only one AI unicorn has been added this year: the Cologne-based translation startup DeepL, which emerged from the online dictionary Linguee. In January, reports indicated that DeepL received a $100 million injection from Bessemer Venture Partners, Institutional Venture Partners in California, Atomico in London, and the US-Japanese World Innovation Lab fund. As of now, the EU has 36 AI unicorns.

Global investments in young AI companies have already reached $51 billion this year, compared to $64 billion in the entire previous year. The numbers reveal that investors have primarily focused on generative AI technologies – which are used for generating text, images, videos, or other content – in 2023. Without the generative AI boom, investments would have declined by 40% compared to the preceding year, as stated by the authors of the Air Street Capital's report.

Dealroom currently lists 20 startups offering generative AI valued at a minimum of $1 billion. The largest among them is OpenAI, the creator of ChatGPT, which has reportedly aimed for a valuation of $90 billion. Following at a significant distance is the developer platform GitHub with a valuation of $7.5 billion..

This year, the UK saw the addition of Synthesia, a company founded in 2017, which focuses on text-to-video technology. Their platform allows users to create videos where human faces articulate pre-entered text. In a Series C funding round held in mid-June, the company successfully raised $90 million.

The authors of the "State of AI" study also analyzed the different approaches to the topic of AI regulation and found a consolidation of three basic approaches. Countries like the UK and India are relying on existing regulations and data protection laws, emphasizing the economic and social benefits of AI in their communication. However, that approach does not indicate a lack of regulatory action. For instance, British regulators proposed principles for AI usage in September, aiming to enhance both competition and consumer protection.

In contrast, the study suggests that the European Union and China are pursuing more extensive legislation. In both cases, comprehensive legislation is in the works. In the EU, the Commission, the Council, and the Parliament are currently negotiating the final version of the AI Act, which is expected between late 2024 and early 2026. In China, where AI investments have also significantly dropped this year, preliminary AI guidelines came into effect in mid-August, with comprehensive legislation expected later this year.

The authors note that it is unlikely that the United States will introduce federal AI regulation in the near future. Instead, the country is pursuing a middle course based on voluntary commitments and laws enacted by individual states.