2022 challenged the highly funded AI vendors that are unlikely to drive the field’s future. VCfunding for the vertical declined more than for IT overall, falling 34.9% in VC deal value to $78.0billion. The median venture growth valuation step-up declined below the overall VC median, to1.3x, demonstrating the prevalence of flat rounds and outlying down rounds faced by leadingvendors such as Dataiku and Noodle.ai. As with global IT, 2022 deal value exceeded 2020’s total.Deal count also declined more than for IT, at 13.2%, as early-stage deal count regressed even aslate-stage deal count remained high. The sector experienced deal count declines of over 50% inautonomous vehicles, processor design, automation platforms, and intelligent sensors as investorsavoided hardware- and labor-intensive businesses. Consumer AI proved to be the most resilientvertical application, declining only 20.5% in VC funding year-over-year, as consumer interest in AI applications emerged.