Generative AI spending to reach $143 billion in 2027, says IDC

It seems that nearly every major company is finding ways to incorporate AI into their business plans, investing in building or adopting generative AI models to carry out specific tasks. A new report forecasts that the spending will only increase. 

International Data Corporation (IDC) predicts that by 2027, spending on generative AI solutions, which includes software, related infrastructure hardware, and IT/business services needed to implement the generative AI, will reach $143 billion. 

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The IDC forecast sees enterprises investing nearly $16 billion worldwide in these generative AI solutions in 2023, representing a compound annual growth rate (CAGR) of 73.3% over the 2023-2027 forecast period. 

“Generative AI is more than a fleeting trend or mere hype. It is a transformative technology with far-reaching implications and business impact,” said Ritu Jyoti, group vice president at IDC.

For comparison, the growth of generative AI investments is more than twice the growth rate in overall AI spending and 13 times greater than the CAGR for worldwide IT spending over the same period, according to IDC. 

IDC forecasts that the investments will follow a natural progression over the next several years following organizations’ shifts from early experimentation to aggressive build-out to widespread adoption. 

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“The rate of GenAI spending will be somewhat constrained through 2025 due to turbulence in workload shifts and resource allocation, not just in silicon but also in networking, facilities, model confidence, and AI skills,” noted Rick Villars, group vice president at IDC. 

By the end of the forecast period, IDC predicts that generative AI spending will account for 28.1% of overall AI spending, a significant increase from 2023, in which generative AI spending accounted for only 9%.