By Supantha Mukherjee

STOCKHOLM (Reuters) - Funding of artificial intelligence and cloud companies in the U.S., Europe and Israel is rising after three years of decline and is estimated to hit $79.2 billion by the end of the year, venture capital firm Accel said in a report on Wednesday.

That is a 27% increase over 2023's $62.5 billion, and investments involving generative AI companies represent about 40% of the 2024 figure.

"The tectonic shift we are seeing with AI right now is bigger than anything that we have seen in the past, be it broadband or mobile or cloud," Philippe Botteri, a partner at Accel, said in an interview.

Of the $56 billion invested in generative AI in 2023 and 2024 combined, about 80% has gone into U.S. companies versus 20% for Europe and Israel. Two-thirds of the AI funding, or $37 billion, has been invested into companies building foundation models, Accel said.

Microsoft ( MSFT )-backed OpenAI raised $6.6 billion earlier this month, Elon Musk's xAI raised $6 billion in May, and Anthropic received $4 billion from Amazon ( AMZN ).

While OpenAI, Anthropic, and xAI led the funding rounds in the U.S., Mistral, Aleph Alpha and DeepL got the most funding in Europe.

About $25 billion was invested in private GenAI companies in the U.S. this year versus $6.4 billion in Europe, Botteri said.

However, funding in Europe is growing at a faster rate, as in 2023, generative AI investment in Europe was just $2.4 billion, a fraction of the $22.4 billion in the U.S.

Beyond AI, the outlook is not as bright, and the era of high software growth has been replaced by a focus on profitability, Accel said.