Global spending on artificial intelligence (AI), including AI-enabled applications, infrastructure, and related IT and business services, is projected to reach $632 billion by 2028, according to a new forecast from the International Data Corporation (IDC). This figure represents more than a doubling of spending and a compound annual growth rate (CAGR) of 29.0% over the 2024-2028 forecast period.

The rapid incorporation of AI, and generative AI (GenAI) in particular, into a wide range of products is driving this growth. However, spending on GenAI solutions will be less than the combined total of all other AI applications, such as machine learning, deep learning, and automatic speech recognition & natural language processing. Despite this, GenAI investments are growing rapidly, with a five-year CAGR of 59.2%, and are expected to reach $202 billion by the end of the forecast, representing 32% of overall AI spending.

Software will be the largest category of technology spending, representing more than half the overall AI market for most of the forecast. Two-thirds of all software spending will go to AI-enabled Applications and Artificial Intelligence Platforms while the remainder will go toward AI Application Development & Deployment and AI System Infrastructure Software.

Spending on AI hardware, including servers, storage, and Infrastructure as a Service (IaaS), will be the next largest category of technology spending. IT and business services will see a slightly faster growth rate than hardware with a CAGR of 24.3%. In comparison, AI software will see a five-year CAGR of 33.9%.

The industry expected to spend the most on AI solutions over the 2024-2028 forecast period is financial services, accounting for more than 20% of all AI spending. The next largest industries for AI spending are software and information services and retail. Combined, these three industries will provide roughly 45% of all AI spending over the next five years. The industries that will see the fastest AI spending growth are Business and Personal Services (32.8% CAGR) and Transportation and Leisure (31.7% CAGR). Seventeen of the 27 industries included in the Spending Guide are forecast to have five-year CAGRs greater than 30%.

"AI-powered transformations have delivered tangible business outcomes and value for organisations worldwide and they are building their AI strategies around employee experience, customer engagement, business process, and industry innovations," said Ritu Jyoti, group vice president and general manager, AI and Data Research at IDC. She further added, "With rampant innovations in trusted AI tools and technologies and improved harmonisation of human and machines interplay, barriers to AI adoption at scale will continue to diminish."