Global AI market projected to crack $1 trillion mark by 2028

A new report by Bain & Company projects that the global market for AI products and services could break through $1 trillion by 2028 – but one major roadblock is the need for more data centers.

Last year, the global AI market was valued at around $185 billion. In the coming years, a massive adoption of AI and Gen AI will see the market grow to at least $780 billion by 2027, with the potential to reach as high as $990 billion if everything goes right. That translates to an annual growth rate of 40% to 55% in the coming years. In 2028, the magical $1 trillion will be cracked.

“The market for AI-related hardware and software is expected to grow between 40% and 55% annually,” said David Crawford, partner at Bain & Company, a global strategy consulting firm.

“Companies are moving beyond the experimentation phase of proofs of concept and minimum viable products, and beginning to scale up generative AI across the organization. As they do, companies will need to adapt to a landscape that is quickly shifting.”

The research breaks down the AI ​​market into three segments. Most spending falls into the infrastructure category, which includes services such as storage, cloud, AI software, and the models that underpin artificial intelligence. By 2028, this category could be worth more than $400 billion.

The second category includes application services and marketplaces, which includes the AI products and services themselves, as well as the applications needed to integrate AI into existing IT infrastructures. The third category includes IT services, like consulting and support for implementing and operating AI applications.

Generative AI

Generative AI, powered by large language models (such as ChatGPT or Gemini), is identified as a major driver of market growth. Many large organizations are already using generative AI to improve customer service, optimize operations, and accelerate their digital transformation journey.

Bain & Company’s analysis shows that about half of companies have already achieved up to 10% efficiency gains through generative AI. The researchers expect this percentage to rise to around 25% within the next three to five years.

According to use cases examined by Bain & Company, about half of companies have already achieved up to 10% efficiency gains using generative AI. Within three to five years, that percentage could increase to about 25%. The companies that have been the most successful in using AI have actually achieved higher efficiency gains.

According to the researchers, the biggest efficiency gains are currently in the areas of sales and marketing, customer service, software development, and back-office functions like finance and purchasing.

AI drives demand for data centers

As the global market for AI products and services expands, so too does the demand for data centers. This is because many AI technologies, such as deep learning and machine learning, require enormous amounts of processing power and data storage.

As a result, data centers are expected to grow in size and capacity. Cloud providers are likely to start building ‘mega centers’ with capacities of 500 megawatts or even 1 gigawatt, as opposed to current data centers, which have a capacity of between 50 and 200 megawatts.

This larger scale will necessitate higher investment costs. The cost of building large data centers is expected to rise from $1 billion to $4 billion today to at least $10 billion in the future. Developers will also need to consider factors such as longer construction times (6-8 years compared to 2-4 years currently) and stricter environmental requirements.

Previous research found that the UAE, alongside India, leads globally in the adoption of AI technologies.