AI market poised to reach $990B by 2027, report says

Recent findings from Bain & Company anticipate significant growth in the market for artificial intelligence (AI) products and services, potentially reaching $990 billion by 2027.

The projections were detailed in the firm's fifth annual Global Technology Report, which examines the anticipated advancements and disruptions within the technology sector due to AI.

The report highlights that the AI-related hardware and software market is expected to grow annually by 40% to 55%, possibly transforming into a trillion-dollar industry. The opportunities identified include the expansion of larger data centres, enterprise-level and sovereign AI initiatives, and enhanced software efficiency. David Crawford, chairman of Bain's Global Technology practice, remarked, "Generative AI is the prime mover of the current wave of change, but it is complicated by post-globalization shifts and the need to adapt business processes to deliver value."

AI's growth is expected to necessitate larger data centres, with Bain estimating an annual growth of AI workloads by 25% to 35% up to 2027. Presently, large data centres cost between $1 billion and $4 billion, but this could increase to $10 billion to $25 billion within five years. The expansion will likely have significant implications on infrastructure engineering, power production, and supply chains.

Additionally, the demand for graphics processing units (GPUs) is predicted to rise substantially, potentially escalating the need for upstream components by 30% or more by 2026, according to the report. This demand surge could mirror the pandemic-induced PC demand burst, intensifying pressure on supply chains for semiconductors.

The emergence of "sovereign" AI blocs represents both challenges and opportunities for the technology sector. Governments, including those in Canada, France, India, Japan, and the United Arab Emirates, are investing millions to develop sovereign AI ecosystems. Anne Hoecker, head of Bain's Global Technology practice, stated, "Establishing successful sovereign AI ecosystems will be time-consuming and incredibly expensive."

Furthermore, the shift to sovereign AI could compel tech companies to rethink their operational strategies. According to Nick Therkelsen, Bain's Expert Partner, "This research shows that Generative AI is driving structural change that will have profound implications for all major economic sectors."

The report also explores how generative AI pressures software development firms to enhance efficiency. Bain's survey suggests that generative AI could save 10% to 15% of software engineering time, with potential efficiency gains of 30% or more if implemented effectively. Roy Singh, global head of Bain's Advanced Analytics practice, commented, "Using generative AI to achieve meaningful improvements in software development is possible but requires efforts that stretch beyond the introduction of coding assistants."

Despite technological advancements, software companies are experiencing slower revenue growth, with a decline in sales and marketing expenditure and a slight reduction in R&D spending. These companies are urged to optimise their research and development investments and clarify their product strategies.

In the realm of mergers and acquisitions (M&A), Bain's report indicates a shift towards "scope deals," which have formed a significant portion of the tech industry's M&A over the past six years. These deals focus on acquiring new capabilities or access to new markets rather than achieving scale.

The report concludes by emphasising the tech sector's adaptability to disruptions and the potential for significant market shifts. David Crawford stated, "For this decade, whoever masters the AI disruption will win big."