Spending on artificial intelligence (AI) is projected to more than double, reaching $632 billion by 2028, according to a new forecast from IDC.
Ritu Jyoti, Group Vice President of AI and Data Research at IDC, attributes this growth to innovations in trusted AI tools and technologies, coupled with enhanced collaboration between humans and machines, which are lowering barriers to widespread AI adoption.
Generative AI (GenAI) solutions, while currently a smaller segment compared to other AI applications such as machine learning, deep learning, and natural language processing, are expected to grow significantly. With a projected five-year compound annual growth rate (CAGR) of 59.2 percent, GenAI spending is set to reach $202 billion by the end of the forecast period, accounting for 32 percent of overall AI expenditures.
Software will remain the largest technology spending category, making up more than half of the total AI market. Within this category, two-thirds of the spending will go towards AI-enabled applications and AI platforms, with the remainder allocated to AI application development, deployment, and system infrastructure software.
AI hardware, including servers, storage, and Infrastructure as a Service (IaaS), will represent the second-largest spending category. However, IT and business services are expected to grow slightly faster than hardware, with a CAGR of 24.3 percent, compared to 33.9 percent for AI software.
The financial services industry is predicted to be the top spender on AI solutions over the 2024-2028 period, with banking leading the charge. Financial services, software and information services, and retail will collectively contribute approximately 45 percent of all AI spending during this period. The industries poised for the fastest AI spending growth include Business and Personal Services (32.8 percent CAGR) and Transportation and Leisure (31.7 percent CAGR).
AI Infrastructure Provisioning is expected to remain the leading use case for AI solutions, although other use cases, such as Augmented Fraud Analysis and AI-enabled Customer Service, are likely to catch up by 2028. The fastest-growing use cases will be Augmented Claims Processing (35.8 percent CAGR) and Digital Commerce (33.2 percent CAGR). Notably, 30 of the 42 AI use cases identified in the Spending Guide are forecasted to have five-year CAGRs exceeding 30 percent.
