Report: AI Spending to Reach $632B in 2028
NEEDHAM, MA – Worldwide spending on artificial intelligence, including AI-enabled applications, infrastructure, and related IT and business services, will more than double by 2028 when it is expected to reach $632 billion, according to a new forecast from IDC's Worldwide AI and Generative AI Spending Guide.
The rapid incorporation of AI, and generative AI (GenAI) in particular, into a wide range of products will result in a compound annual growth rate (CAGR) of 29% over the 2024-2028 forecast period.
"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."
While GenAI has captured the world's attention over the past 18 months, spending on GenAI solutions will be less than the combined total of all other AI applications, such as machine learning, deep learning, and automatic speech recognition & natural language processing. However, the rapid growth in GenAI investments will enable the category to outpace the overall AI market with a five-year CAGR of 59.2%. By the end of the forecast, IDC expects GenAI spending to reach $202 billion, representing 32% of overall AI spending.
Software will be the largest category of technology spending, representing more than half the overall AI market for most of the forecast. Two thirds of all software spending will go to AI-enabled Applications and Artificial Intelligence Platforms while the remainder will go toward AI Application Development & Deployment and AI System Infrastructure Software. Spending on AI hardware, including servers, storage, and Infrastructure as a Service (IaaS), will be the next largest category of technology spending. IT and business services will see a slightly faster growth rate than hardware with a CAGR of 24.3%. In comparison, AI software will see a five-year CAGR of 33.9%.
The industry that is expected to spend the most on AI solutions over the 2024-2028 forecast period is financial services. With banking leading the way, the financial services industry will account for more than 20% of all AI spending. The next largest industries for AI spending are software and information services and retail. Combined, these three industries will provide roughly 45% of all AI spending over the next five years. The industries that will see the fastest AI spending growth are Business and Personal Services (32.8% CAGR) and Transportation and Leisure (31.7% CAGR). In addition, 17 of the 27 industries included in the Spending Guide are forecast to have five-year CAGRs greater than 30%.
AI Infrastructure Provisioning will be the leading use case for AI solutions for most of the forecast. However, with the slowest projected growth rate among the use cases included in the Spending Guide (14.7% CAGR) due to early investment by service providers, IDC expects several other use cases to catch or overtake it by 2028. These use cases include Augmented Fraud Analysis and Investigation and AI-enabled Customer Service and Self Service. The use cases that will see the fastest spending growth will be Augmented Claims Processing (35.8% CAGR) and Digital Commerce (33.2% CAGR). Thirty of the 42 AI use cases identified in the Spending Guide are forecast to have five-year CAGRs greater than 30%.
"We are thrilled to release a new version of IDC's Worldwide AI and Generative AI Spending Guide with all new AI use cases aligned to line of business (LoB) functions and providing a GenAI/Rest of AI and industry view of each use case," said Karen Massey, research director, Data & Analytics at IDC. "While industry-specific AI use cases approach 27% of the total spend by the end of the forecast period, the business functions that IDC expects will see accelerated AI investment are customer service, IT operations, and sales."
AI spending in the United States will reach $336 billion in 2028, making it the largest geographic region for AI investment and accounting for more than half of all AI spending throughout the forecast period. GenAI spending in the U.S. 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 (excluding Japan and China).
