AI Applications Forecasts Get Revised Upwards at IDC

Spending on artificial intelligence in the United States will grow to $120 billion by 2025, representing a compound annual growth rate of 26 percent between 2021 and 2025, says IDC, which projects that the U.S. market will constitute half of the global market. 

So that implies a global AI applications market of about $240 billion by 2025.

That represents a “robust” expectation, as it lies at the top end of Omdia forecast ranges of revenue earned from AI software sales. 

source: Omdia 

Forecasts will vary significantly based on what is included in the definition: app software only; hardware; system integration services; consulting; AI feature upgrades to existing products. 

If you have ever worked doing market research, you know everything rests on the assumptions. 

The IDC and Omdia forecasts seem to include only AI apps. Almost arbitrarily-larger figures would result if we looked at all AI-related revenues, from chipsets and programming tools to hardware and professional services. 

Still, the IDC methodology suggests a significant new market, even if some of the reported revenue is likely cannibalized from other existing product segments. And IDC has ramped up its forecasts. In 2020 it predicted global revenue by 2024 of only $110 billion. Now IDC expects U.S. AI spending alone (on applications) to reach $120 billion. 

source: IDC 

Retail will remain the largest U.S. industry for AI spending while banking will be the second largest industry, says IDC. Augmented customer service agents, and expert shopping advisors making product recommendations will drive about 40 percent of AI spending in the industry, IDC predicts. 

These two industries will represent nearly 28 percent of all AI spending in the United States in 2025.

But professional services, media, and securities and investment services industries will have CAGRs greater than 30 percent, IDC notes. 

AI spending in the banking industry will be spread across customer service (program advisors and recommendation systems); fraud Analysis and investigation) and security.

Customer service and sales will represent more than 20 percent of all AI spending in the U.S. market in 2025, across most industries, IDC projects.