Global spending on artificial intelligence (AI) is set for a compound annual growth rate (CAGR) of 29.0% over the next five years to reach $632 billion including AI-enabled applications, infrastructure and related IT and business services, according to a new report from International Data Corp (IDC).
Surprisingly, generative AI spending will be less than the combined total of all other AI applications like machine learning, deep learning and automatic speech recognition and natural language processing. However, GenAI investments will outpace the overall AI market with a five-year CAGR of 59.2%. By the end of the forecast, IDC said GenAI spending will reach $202 billion, or about 32% of overall AI spending.
"AI-powered transformations have delivered tangible business outcomes and value for organizations worldwide and they are building their AI strategies around employee experience, customer engagement, business process, and industry innovations," said Ritu Jyoti, group vice president and general manager, AI and data research at IDC. "With rampant innovations in trusted AI tools and technologies and improved harmonization of human and machines interplay, barriers to AI adoption at scale will continue to diminish."
Largest spend
Software will be the biggest category in technology spending, representing more than half of the overall AI market during the forecast. Two thirds of this spending will go to AI-enabled applications and AI platforms with the remainder going toward AI application development and deployment as well as AI system infrastructure software.
AI hardware and Infrastructure as a Service (IaaS) spending is the second largest category with a 24.3% CAGR. AI software will see a five-year CAGR of 33.9%.
Regionally, AI spending in the U.S. will reach $336 billion in 2028, IDC said, making it the largest geographic region for AI investment and accounted for more than half of all AI spending. GenAI spending is forecast to be $108 billion in 2028. Western Europe will be the second largest region for AI spending followed by China and Asia/Pacific.
