AI software spend to reach $64 billion by 2025: Forrester

The AI software market, made up of off-the-shelf and custom AI software is projected to double from $33 billion in 2021 to $64 billion in 2025, outpacing the growth of the rest of the software market.

According to a recent report from Forrester, AI maker tools, AI-centric software and AI-infused software are the three categories driving growth in the market, with AI-infused software expected to see the fasted growth due to its enterprise level adoption.

Forrester predicts that by 2025, 31 percent of AI software spend will be AI-infused, meaning that the software uses AI to increase its market attractiveness, but does not need its AI capabilities to be activated in order to work. This is contrast with AI-centric software which incorporates the AI intrinsically, and cannot work without the AI components running.

AI maker tools, such as machine learning frameworks and AI infrastructure are used to develop AI applications.

According to the authors, “The pandemic led to an unexpected 6 percent software growth in the US in 2021 and a record 12 percent growth in 2022. In particular, we believe that AI software will grow 50 percent faster than the software market over the next two years, with an annual growth rate of 18 percent.”

The areas where AI software spend is expected to be deployed are across security, customer and human capital management, optimisation, knowledge and data intelligence, database, health and drug discovery.

The US and China dominate the market share of AI software spend, making up 71 percent of the global spend in 2022.

This year the United States invested $18.9 billion in AI software, as the leading destination for private AI investment.

According to the report, “The American firms IBM and Microsoft have the largest portfolio of AI patent applications and rank first and second across most patented AI techniques. Compared to China, the US has a much larger share of AI enterprises working in information and communications and professional, scientific, and technical activities.”

China has spent $9.6 billion with a push behind AI research as well as with high private AI investment.

“The world’s largest AI voice recognition start-up, China’s iFlytek, has 700 million users; in finance, WeChat Pay has 20 times more users than Apple Pay has users in the US. SenseTime and Megvii have developed applications for instantaneous facial recognition that can identify individuals from China’s 1.4-billion-person population in seconds,” the report said.