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Worldwide revenues for AI skyrocket, set to reach $550B by 2024

Worldwide revenues for the artificial intelligence (AI) market, including software, hardware, and services, are forecast to grow 16.4% year over year in 2021 to $327.5 billion, according to the latest release of the IDC Worldwide Semiannual Artificial Intelligence Tracker.

By 2024, the market is expected to break the $500 billion mark with a five-year compound annual growth rate (CAGR) of 17.5% and total revenues reaching $554.3 billion.

Among the three technology categories, software represented 88% of the total AI market revenues in 2020. However, it is the slowest growing category with a five-year CAGR of 17.3%.

Within the AI software category, AI Applications took the largest share of revenue at 50% in 2020.

In terms of growth, the AI Software Platforms market is forecast to be the strongest with a five-year CAGR of 32.7%.

The slowest will be AI System Infrastructure Software with a five-year CAGR of 13.7% while accounting for roughly 36% of AI software revenues.

Within the AI Applications market, AI ERM is expected to grow slightly stronger than AI CRM over the next five years.

The AI Services category grew slower than the overall AI market with 13% annual revenue growth in 2020.

However, it is forecast to grow 17.4% year over year in 2021, outperforming the overall AI market by approximately 1%. Its five-year CAGR is expected to be 18.4% with revenues reaching $37.9 billion by 2024.

This technology category breaks down into two market segments:

IT Services and Business Services: IT Services is the larger of the two, accounting for nearly 80% of all AI Services revenues.

From a growth perspective, IT Services for AI tends to grow faster than Business Services for AI except for 2024, where Business Services for AI is forecast to perform slightly higher than both, IDC states.

IT Services for AI and the overall AI Services market: The latest release of the AI Tracker covers a total of 160 vendor companies in the AI Services market.

Overall, the competitive landscape in both services markets for AI is a highly fragmented one where players from across the services value chain continue to invest in technology assets, innovation resources, and expertise in applying AI to solve industry- and domain-specific problems for clients, IDC states.

The AI Hardware market is the smallest category with approximately 5% share of overall AI revenues in 2020. The share is forecast to increase slightly in 2021 at the expense of AI Software.

The AI Server market grew faster than the AI Storage market in 2020, but these results are expected to the reverse in 2021 when AI Storage is forecast to grow 31.8% year over year compared to 26.4% for the AI Server market.

By 2024, AI Hardware is forecast to be a $30.5 billion market with AI Servers representing an 82% revenue share.

Under IT Services for AI, the top three companies in 1H 2020 were IBM, Accenture, and Infosys.

These were the only companies to bring in more than $500 million in IT Services for AI revenues and their combined share of the market was 28%.

Beyond these companies, 13 other companies generated more than $100 million each during the same period.

In the Business Services for AI market, there were only four companies, Ernst & Young, PwC, Deloitte, and Booz Allen Hamilton, that generated revenues of more than $100 million in 1H 2020.

In terms of 1H 2020 vendor share, the top companies in the AI Server market were (in alphabetical order) Dell, HPE, Huawei, IBM, Inspur, and Lenovo.

Each of these companies brought in more than $250 million in 1H 2020 and collectively these six companies accounted for 58% of the market, while 30% went to ODMs.

While the number of vendor companies tracked in each market is the same, the competitive landscape of AI Server market is more fragmented than the AI Storage market, where the top three companies accounted for 49% market share in 1H 2020.

IDC program vice president for AI Research, Ritu Jyoti, says, "The global pandemic has pushed AI to the top of the corporate agenda, empowering business resilience and relevance.

"AI is becoming ubiquitous across all the functional areas of a business. Advancements in Machine Learning, Conversational AI, and Computer Vision AI are at the forefront of AI software innovations, architecting converged business and IT process optimisations, predictions and recommendations, and enabling transformative customer and employee experiences."

IDC research director Infrastructure Systems, Platforms and Technologies, Peter Rutten, says, "The AI server and storage markets continue to see rapid growth, providing an increasingly specialised and innovative infrastructure foundation under the entire AI landscape.”