AI spending growth predicted to continue for five years

Spending on AI hardware, software and services grew 20.7% in 2021, according to new research, with hundreds of companies vying for business opportunities

The global market for artificial intelligence (AI) hardware, software and services is expected to reach almost US$450 billion this year and continue to grow for at least five years, according to new research.

The most recent International Data Corporation (IDC) Worldwide Semiannual Artificial Intelligence Tracker revealed global revenues for the AI market totalled US$383.3 billion last year, an increase of 20.7% over 2020 figures.

AI software took the largest share of the AI market in 2021 in the areas of Applications, Applications Delivery & Deployment, System Infrastructure Software, and AI Platforms. Combined, these generated more than US$340 billion in market value in 2021. 

AI Applications alone represented nearly half the total, but AI Platforms demonstrated the best year-over-year growth at 36.6%. With nearly 300 companies in this space, the AI Applications market remains highly competitive, says IDC. Customer Relationship Management (CRM) Applications and Enterprise Resource Management (ERM) Applications each delivered about 16% of the total. 

In 2021, AI-centric applications captured 12.9% of the market, up 29.3% from the previous year. The remainder of the market was held by AI non-centric applications, that is those apps that use AI within the build, but could operate without this AI element.

AI software in the cloud also continues to show growth, says the report, and  IDC expects cloud deployment of new AI software to surpass on-premises deployments in 2022.

Clients looking for production-grade AI boost service spending

The report showed the AI Services market had seen its total value reach US$24 billion in 2021, an increase of 22.4% from the previous year. The AI IT Services category grow 21.9% year over year to $18.8 billion, fueled by client demand for expertise in production-grade AI solutions. The AI Business Services category grew 24.2% year over year.

AI Hardware saw the fastest growth but from the smallest baseline. Revenues reached US$18.8 billion, an 38.9% increase from the previous year. Hardware growth was driven by efforts to build dedicated AI systems capable of meeting the increased compute and storage demands of AI models and data sets, with server purchases accounting for US$15.6 billion.

The benefits of AI technologies are being discovered by a growing number of companies across all sectors, says IDC’s Associate Vice President, Data & Analytics Rasmus Andsbjerg. "AI can be a source for fast-tracking digital transformation journeys, enable cost savings in times of staggering inflation rates and support automation efforts in times of labour shortages."

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