Generative AI spending to reach $143 billion in 2027: IDC

Enterprise spending on generative AI services, software and infrastructure will skyrocket over the next four years, jumping from $16 billion this year to $143 billion in 2027, according to technology research and advisory firm IDC.

Spending on generative AI over the four year period to 2027 is expected to reach a compound annual growth rate (CAGR) of 73.3%, a figure which IDC says is more than twice the rate of growth in overall AI spending and almost 13 times greater than the CAGR for worldwide spending on IT over the same period.

IDC has forecast that by the end of 2027, spending on generative AI will account for 28.1% of overall AI spending, with generative AI infrastructure — which includes hardware, infrastructure as a service (IaaS), and system infrastructure software (SIS) — representing the largest area of investment during the so-called buildout phase of this period.

However, despite this initial growth spurt, IDC believes that spending on generative AI services will gradually overtake infrastructure by the end of the forecast period, with a five-year CAGR of 76.8%. Furthermore, the analyst house predicts that generative AI software segments will see the fastest growth during the 2023-2027 forecast period, with platforms and models delivering a CAGR of 96.4%, compared to the 82.7% CAGR it expects to see in the application development and deployment (AD&D) and applications software segment.

Companies are currently experimenting with generative AI, but are expected to start aggressively building out targeted business use cases for widespread adoption, including an extension of AI applications to edge networks, IDC said.

“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 for AI at IDC, in a news release for the new report. “With ethical and responsible implementation, GenAI is poised to reshape industries, changing the way we work, play, and interact with the world.”

IDC said it will be publishing more detailed forecasts, including the impact on end devices, network services, and software applications that are enhanced through incorporation of generative AI, in the coming months.