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Even with hot artificial intelligence startups scoring hefty investment rounds at massive valuations, the broader venture funding environment remains ice cold.

Deal volume for U.S. venture investments in the first quarter sank to its lowest level since 2017, according to data published this week by PitchBook. The story was similar across the globe, with worldwide volume reaching its lowest since 2016 and total deal value falling to a level not seen since 2019.

The dearth of dealmaking shows that, despite a rebound in tech stocks last year and continuing hype around generative AI, venture capitalists are still largely on the sidelines. Startup financings soared to record levels in 2021, before slowing dramatically the following two years as inflationary concerns and rising interest rates pushed investors into safer assets and forced money-losing tech companies to focus on efficiency over growth.

The Federal Reserve has indicated that cuts to its benchmark interest rate are likely coming in 2024, but for the moment they remain steady. Fed Chairman Jerome Powell said Wednesday it will take a while for policymakers to evaluate the current state of inflation, keeping the timing of potential interest rate cuts uncertain.

“Sticky inflation has pushed hope of interest rate cuts to the back half of the year, and recession remains a possibility,” PitchBook analysts wrote in an email accompanying the firm’s data. “We don’t expect deal activity to pick up in a meaningful way in the near term.”

There were 2,882 venture deals in the first quarter, the lowest since the third quarter of 2017, according to PitchBook. The value of those deals totaled $36.6 billion, down 62% from a peak of $97.5 billion in the fourth quarter of 2021. The latest quarter was about even with the number from the third quarter of last year, but otherwise marks the lowest since the end of 2019.

Globally, the 7,520 deals were the fewest since the third quarter of 2016. And at $75.9 billion, investment was the lowest since mid-2019. The analysts said VCs across the globe have had trouble returning funds to limited partners over the past two years, which has made many reluctant to reinvest.

Some positive signs for the market came in the form of IPOs. Social media site Reddit and Astera Labs, which sells data center connectivity chips to cloud and AI infrastructure companies, held their debuts in March, the first two venture-backed tech companies to go public in the U.S. since September. Rubrik, a data security software vendor, filed its IPO prospectus this week.

According to PitchBook, Reddit and Astera made up 73.4% of the total exit value in the U.S. in the first quarter.

“The prospect of increasing IPO activity created buzz in the market narrative because of how slow exits have been for two years,” the PitchBook analysts wrote.

WATCH: Y Combinator CEO Gary Tann on Reddit IPO

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