IDC Forecasts Spending on GenAI Solutions Will Reach $143 Billion in 2027 with a Five-Year Compound Annual Growth Rate of 73.3%

Estimated reading time: 1 minute

A new forecast from International Data Corporation (IDC) shows that enterprises will invest nearly $16 billion worldwide on GenAI solutions in 2023. This spending, which includes GenAI software as well as related infrastructure hardware and IT/business services, is expected to reach $143 billion in 2027 with a compound annual growth rate (CAGR) of 73.3% over the 2023-2027 forecast period. This is more than twice the rate of growth in overall AI spending* and almost 13 times greater than the CAGR for worldwide IT spending over the same period.

"Generative AI is more than a fleeting trend or mere hype. It is a transformative technology with far-reaching implications and business impact," says Ritu Jyoti, group vice president, Worldwide Artificial Intelligence and Automation market research and advisory services at IDC. "With ethical and responsible implementation, GenAI is poised to reshape industries, changing the way we work, play, and interact with the world."

IDC expects GenAI investments to follow a natural progression over the next several years as organizations transition from early experimentation to aggressive build out with targeted use cases to widespread adoption across business activities with an extension of GenAI use to the edge.

"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, Worldwide Research at IDC. "Other factors that might constrain the expected rate of investment include pricing, concerns about privacy and security, and the possibility of an existential crisis that triggers major consumer antipathy or government interventions."

By the end of the forecast, GenAI spending will account for 28.1% of overall AI spending, up significantly from 9.0% 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.

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 services will gradually overtake infrastructure by the end of the forecast with a five-year CAGR of 76.8%. The GenAI software segments will see the fastest growth over the 2023-2027 forecast with GenAI platforms/models delivering a CAGR of 96.4% followed by GenAI application development & deployment (AD&D) and applications software with an 82.7% CAGR.