IDC Forecasts Strong Growth for AI Market in 2020

Worldwide revenues for the AI market are expected to total $156.5 billion in 2020, an increase of 12.3% over 2019, according to IDC. While this year's growth is somewhat slower than previous years due to the economic impact of COVID-19, IDC believes investment in AI will recover quickly. A new forecast shows worldwide revenues surpassing $300 billion in 2024 with a five-year compound annual growth rate (CAGR) of 17.1%.

Software is the largest AI technology group delivering roughly 80% of all revenue. Most of the software revenue comes from AI Applications ($120.4 billion in 2020) with Software Platforms ($4.3 billion) delivering the remainder. CRM AI Applications and ERM AI Applications are the two largest segments with 20% and 17% share. Other key segments include AI for Content Workflow and Management Applications, Production Applications, and Collaborative Applications. While software will remain the largest category throughout the forecast, it will also see the slowest growth with a five-year CAGR of 16.7%.

The second largest AI category is services, which IDC forecasts will reach $18.4 billion in 2020, an increase of 13% year over year. Within the AI services market, AI IT Services accounts for nearly 80% of the category's revenue with AI Business Services delivering the rest. Rising demand for expertise in embedding AI-enabling technologies into business analytics and intelligent automation programs has led to a highly competitive and fragmented AI services vendor landscape.

IDC expects AI hardware (server and storage combined) revenues to reach $13.4 billion in 2020, representing 10.3% year-over-year growth, which is a significant drop from the prior year when it grew 33.4%. Within the hardware market, AI Storage is forecast to grow 11.4% this year, slightly ahead of AI Server, which is expected to grow 10.1%. However, from a size perspective, AI Server is responsible for more than 80% of total AI hardware revenues. The overall hardware market is forecast to have a strong recovery with 35.5% year-on-year growth next year, led by AI Storage, which is expected to grow 43.1% year over year.