A fresh wave of M&A is coming for the artificial intelligence (AI) industry.

That's because consolidation is the most likely way to exit in the AI space, with a few exceptions such as Astera Labs' (NASDAQ:ALAB) recent initial public offering.

"A lot of companies took a lot of very risky bets, a lot of them are running out of money," said Hugging Face co-founder and Chief Executive Officer Clem Delangue according to Bloomberg.

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AI technology still lacks widespread use scenarios — not ideal for startups hoping to turn a profit in the near term. Larger companies are now absorbing those early-stage companies that cannot guarantee consistent cash flow.

When operating costs due to developing AI technology are priced in, firms with limited cash balances are burning through their funds to keep afloat.

The spike in M&A activity comes as Benzinga gears up for a virtual AI summit on May 30. The event will include Qualcomm Inc's (NASDAQ:QCOM) COO and CFO Akash Palkhiwala, as well as several top venture capital (VC) investors in the space. Registration for "AI Unleashed: Exploring the Possibilities" is free.

For larger companies, like Microsoft-backed Open AI, mass adoption of their most recent models appears closer down the line.

On Monday, the Sam Altman-led company unveiled GPT-4o. The latest model can now communicate via images and voice, as well as text.

The model could have immediate applications for businesses and individuals looking for a more natural interface with AI assistants.

Other companies are raising significant amounts of cash, like Mistral AI's $6 billion raise last week.

But many others are selling to companies looking for purchasing opportunities and have more direct access to capital.

So far this year, the amount of capital spent in M&A has already surpassed that of 2023, with 104 deals worth north of $35 billion.

The figure, however, continues to lag behind what venture capital spent in the sector. Investment by VC firms topped the $50 billion in 2023, according to Crunchbase. OpenAI, Anthropic and Inflection AI, were some of the companies that took more than $1 billion each last year.

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