AI Market Outlook to 2029

Global AI Market Overview

In 2023, Global AI market was valued at USD 210 Bn and is anticipated to reach a market size of USD 1.18 trillion by 2029, propelled by growth in the adoption of autonomous AI, growth in adoption of cloud-based applications, AI adoption in industries like healthcare, finance and manufacturing, and increase in investments in artificial intelligence systems.

The market is highly consolidated with key players including Intel, AMD, NVIDIA, and Qualcomm Technologies, Inc. Intel is the largest player in the market followed by AMD and others.

In April 2024, Microsoft invested $1.5 billion in Abu Dhabi-based AI company G42 to strengthen their collaboration on bringing Microsoft AI technologies and skilling initiatives to the UAE and other countries.This partnership aims to empower organizations globally to harness AI and cloud benefits while ensuring AI safety and security standards are met.

Global AI Current Market Analysis

North America as dominant region: North America is dominating the global AI market with countries such as USA and Canada leading the market. The market in North America is driven by the need for automation, data-based decision-making, and improved consumer experiences, which have fueled the demand for AI software platforms and applications. The US is the global AI hub, with almost 60% of top tier AI researchers, $249 billion in private funding and more than 15,000 AI companies operating in the US. The number of AI-related job postings in the US has increased on average from 1.7% in 2021 to 1.9% in 2022.

Europe as emerging region: Europe is emerging as the second-biggest region in the global AI market led by countries such as UK, France, and Germany, driven by increasing AI startups in the region, increasing utilization of cloud computingservices, and increasing adoption of IT and BFSI. The UK is 4th largest AI market globally and Europe's primary AI center and largest tech hub outside the US and China, with London hosting the country's largest AI cluster. UK is home to 758 Al startups, 645 of which are based in London.

USA as dominant country: The USA is the leading country in the North American region followed by Canada. The exceptional growth in the market is driven by investments and partnerships, robust technological infrastructure, and world-class research institutions. In 2023, Chip manufacturers like Intel, and NVIDIA have invested USD 100 and USD 3.8 Bn respectively for chip manufacturing. Additionally, Europe is home to several leading semiconductor companies and chip manufacturers, such as Arm, imagination technologies, and Graphcore, which provide specialized hardware for AI applications.

Global AI Market Segmentation

The Global AI Market can be segmented based on several factors:

By Components: The global AI market's segmentation by components is classified into hardware and software. In 2023, Software led the market due to their critical role in providing the frameworks and tools necessary for developing and deploying sophisticated AI applications. The platforms, such as TensorFlow and IBM Watson, are highly sought after for their scalability and comprehensive capabilities, enabling businesses to build and manage advanced AI solutions.

By Technology: The global AI market segmentation by technology is classified into machine-learning, natural language processing, context-aware computing, machine vision, and others including robotics, generative adversarial networks, expert systems etc. In 2023, Machine Learning (ML) technologies dominated, with supervised learning algorithms leading the way. These algorithms, which include techniques such as decision trees and support vector machines, are preferred for their ability to provide accurate predictions and classifications based on labeled datasets.

By End-User: The global AI market segmentation by end-user is divided into healthcare, retail, IT, BFSI, automotive, and others including agriculture, energy, education, media and many more. In 2023, the Healthcare sector was dominating the market. This sub-segment leverages AI to enhance diagnostic accuracy by analyzing medical images such as MRI and CT scans. The increasing use of AI for detecting anomalies and supporting radiologists in diagnosing conditions drives the high adoption of medical imaging solutions in healthcare.

Global AI Market Growth Drivers:

Growth in the adoption of autonomous AI: Autonomous AI systems, which perform tasks without human intervention, are experiencing significant growth including self-driving cars, autonomous drones for package delivery, and manufacturing robots. These technologies are revolutionizing industries by enhancing efficiency, reducing labor costs, and improving safety. In 2022, 23.80 million units of self-driving cars were sold and it is expected to grow to 80.43 million units by 2032. In 2021, China was the leading country int this market, where 3.3 million autonomous electric vehicles were sold.

Growth in Adoption of Cloud-based Applications: The proliferation of internet connectivity and the availability of powerful computing resources have led to a surge in the adoption of cloud-based platforms and services. These cloud-based solutions facilitate the global deployment of AI services by providing scalable infrastructure, extensive data storage, and high processing power. In 2023, worldwide public cloud spending is projected to grow by 20.7%, reaching approximately $591.8 billion compared to $490.3 billion in 2022.

Increase in investments in artificial intelligence systems: The global economic impact of AI is projected to be substantial, with AI predicted to contribute $15.7 trillion to the world economy by 2030. This anticipated growth is fueling significant investments in AI technology development and adoption. Global investments in AI are expected to reach $200 billion by 2030, reflecting the increasing recognition of AI's potential to drive economic growth and competitiveness.

Global AI Market Challenges:

High initial costs and replacement concerns of humans: One of the significant challenges in the AI market is the high initial costs associated with developing and implementing AI solutions. The average cost of developing an AI software can rise up to USD 400,000. Additionally, the cost of assembling a development team, which includes data scientists, machine learning engineers, artificial intelligence developers, and software developers, can amount to around USD 320,000.

Different regulatory approaches: The global landscape of AI regulation is increasingly fragmented and regionalized, with different countries adopting varying approaches to AI governance. The European Union, the US, and China, for example, have developed distinct regulatory frameworks reflecting their unique cultural norms and legislative environments. The EU tends to focus on stringent data protection and ethical standards, the US emphasizes innovation and market-driven approaches, while China adopts a more centralized and state-controlled model.

Global AI Market Future Outlook

The Global AI market is expected to reach a market size of USD 1.18 trillion by 2029 showing substantial growth driven by Advancements in Autonomous AI, Expansion of Cloud-Based AI Solutions, and Broader AI Integration in Key Industries.

Future Market Trends

Advancements in Autonomous AI: The future of AI is set to see significant advancements in autonomous systems, including self-driving cars, autonomous drones, and intelligent robots. As technology continues to improve, these systems will become more reliable, efficient, and widely adopted. The automotive industry is likely to witness the commercialization of fully autonomous vehicles.

Expansion of Cloud-Based AI Solutions: The adoption of cloud-based AI applications is expected to grow exponentially, driven by ongoing improvements in internet connectivity and cloud infrastructure. Businesses will increasingly leverage cloud platforms for their AI needs, benefiting from scalable, cost-effective, and easily deployable AI services.