GenAI solution spending to double in 2024, grow $151.1 billion

The International Data Corporation (IDC) said businesses invested more than $19.4 billion worldwide in GenAI solutions in 2023.

This spending, which includes GenAI software as well as related infrastructure hardware and IT/business services, is expected to more than double in 2024 and reach $151.1 billion in 2027 with a compound yearly growth rate (CAGR) of 86.1 per cent over the 2023-2027 forecast period.

Group Vice President, Worldwide Research at IDC, Rick Villars, said, “Despite IT headwinds in 2023, businesses accelerated their exploration of GenAI to boost business transformation. In 2024, the shift to AI everywhere will enter a critical buildout phase as enterprises make major new investments to drastically reduce the time and costs associated with customer and employee productivity use cases. From there, the focus will shift to investments that boost revenue and business outcomes.”

IDC expects GenAI investments to follow a natural progression over the next several years as organizations transition from early experimentation to aggressive infrastructure and trained data model building to widespread adoption with extensions to the edge of all business activities.

While companies at all levels will experience a shift in their technology investments toward AI implementation and the adoption of AI-enhanced products/services, the IT industry will make much a greater and faster AI pivot during the same period. This is because every company will race to introduce AI-enhanced products/services and assist their customers with AI implementations. For most, AI will replace the cloud as the lead motivator of innovation.

GenAI Infrastructure, including hardware, Infrastructure as a Service (IaaS), and system infrastructure software (SIS), will represent the largest area of investment during the build-out phase. But GenAI Platform and Application Software will gradually overtake infrastructure by the end of the forecast with a five-year CAGR of 99.6 per cent. Similarly, GenAI Services, including IT and business services, will nearly equal infrastructure spending by the end of the forecast with a five-year CAGR of 94.2 per cent.

By the end of the forecast, GenAI spending will account for 29.0 per cent of overall AI spending, up significantly from 10.8 per cent in 2023.

GenAI spending will remain strong well beyond the build-out phase as these solutions become a foundational element in enterprises’ digital business control platforms.

Group Vice President of worldwide Artificial Intelligence and Automation market research and advisory services at IDC, Ritu Jyoti, said: “As we look ahead, generative AI has catalyzed investments in traditional AI solutions. The synergy between traditional and generative AI opens up a world of possibilities across industries.”