Published on November 9, 2023, 6:08 am

Worldwide revenues for the artificial intelligence (AI) market reached $383.3 billion in 2021, with a 20.7% increase compared to the previous year. This growth is driven by the continued investment in AI and automation technologies, even in the face of high inflation and recession fears.

According to Ritu Jyoti, Group Vice President of Artificial Intelligence and Automation Research at IDC, businesses view technology as a crucial driver of success and are leveraging AI to future-proof their operations. Lessons from past downturns have illuminated the importance of integrating technology into business strategies.

IDC’s latest Worldwide Semiannual Artificial Intelligence Tracker predicts that the AI market value will exceed $450 billion in 2022, maintaining a robust year-over-year growth rate throughout the five-year forecast period.

The benefits of AI are being recognized across industries and functions. Powerful AI solutions empower organizations to make better decisions and achieve higher productivity. Rasmus Andsbjerg, Associate Vice President of Data & Analytics at IDC affirms that AI offers solutions to current challenges such as fast-tracking digital transformation journeys, cost savings during times of inflation rates, and supporting automation efforts amid labor shortages.

In terms of market share, AI software made up the largest portion of the overall AI market in 2021. The four main categories within AI software – AI Applications Delivery & Deployment, AI Applications, AI System Infrastructure Software, and Artificial Intelligence Platforms – generated more than $340 billion in market value last year. Of these categories, AI Applications represented nearly half of the total revenue.

AI platforms experienced the strongest year-over-year growth at 36.6%, although they started from a smaller baseline compared to other categories.

Within the AI Applications category, Customer Relationship Management (CRM) applications and Enterprise Resource Management (ERM) applications accounted for about 16% each. The remaining share was captured by various other available AI Applications. With close competition among nearly 300 companies, the AI Applications market remains highly competitive.

IDC’s AI Tracker also reveals that AI-centric applications, in which AI technologies play a central and critical role, are slowly increasing their market share within the AI Software market. In 2021, these applications accounted for 12.9% of the market, representing a 29.3% year-over-year growth. The majority of the market was dominated by AI non-centric applications, where AI technologies are integral to specific workflows but not essential for overall application functionality.

The adoption of cloud deployment for AI Software continues to grow steadily. In 2021, 47.3% of new AI Software purchases were deployed to the public cloud, showcasing an increase of four percentage points from 2020 and 8.4 percentage points from 2019. IDC predicts that cloud deployment will surpass on-premises deployments in 2022.

The AI Services market experienced a significant increase in total value, growing by 22.4% in 2021 to reach $24 billion. Clients’ demand for expertise in developing production-grade AI solutions was a key driver behind the growth of the AI IT Services category (21.9% YoY growth) and the AI Business Services category (24.2% YoY growth).

AI Hardware emerged as both the smallest segment ($18.8 billion) and the fastest-growing segment (38.9% YoY growth). This growth can be attributed to efforts aimed at building specialized AI systems capable of meeting the increased computational and storage requirements of complex AI models and datasets.

While both segments showed strong growth in 2021 – with a notable growth rate of 39.1% for AI Servers – server purchases accounted for a larger portion at $15.6 billion compared to AI Storage.

Despite economic uncertainties, organizations worldwide continue to invest in generative AI technologies and solutions due to their transformative potential across various industries and functions. As we move forward, the AI market is expected to further expand, offering enhanced decision-making capabilities and increased productivity for businesses.

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