AI Unicorns Caught in IPO Limbo as M&A Beckons

In the first quarter of this year, there was a rise in mergers and acquisitions in the artificial intelligence (AI) industry, with 40 exit transactions compared to 38 in the previous quarter. Yet, the number of transactions in the current period was lower than the 62 deals that took place in the corresponding period the previous year.

The biggest transaction in the first quarter was Veradigm’s acquisition of ScienceIO, a biomedical language platform, for $140 million. The increase in M&A deals is due to the interest of key buyers, including private equity companies and big corporations like Microsoft and Nvidia, who have built up large amounts of cash.

Significantly, Nvidia has increased its cash and short-term investments to a remarkable $26 billion in the last four quarters, establishing the chip giant as a strong competitor in the AI acquisition arena.

Despite the uptick in M&A transactions, the AI industry’s overall deal flow has been hindered by higher interest rates and overinflated valuations of AI startups. Although the IPO market may be starting to open up, it’s doubtful that it will have a major effect on the AI industry since most startups in this sector are still in their early stages and are far from being ready to go public.

As a result, it is anticipated that mergers and acquisitions in the field of artificial intelligence will be led mainly by companies looking to enhance their AI skills and take advantage of the sector’s huge opportunities.