The global spending on artificial intelligence (AI), including AI-enabled applications, infrastructure and related IT and business services, is likely to reach $632 billion by 2028, a new report said on Monday.

The rapid incorporation of AI, and generative AI (GenAI) in particular, into a wide range of products will result in a compound annual growth rate (CAGR) of 29 per cent over the 2024-2028 forecast period, according to a new forecast by the International Data Corporation (IDC).

AI spending in the US will reach $336 billion in 2028, making it the largest geographic region for AI investment. Western Europe will be the second largest region for AI spending followed by China and Asia/Pacific (excluding Japan and China).

Ritu Jyoti, group vice president and general manager, AI and Data Research at IDC, with rampant innovations in trusted AI tools and technologies and improved harmonization of human and machines interplay, barriers to AI adoption at scale will continue to diminish.

The rapid growth in GenAI investments will enable the category to outpace the overall AI market with a five-year CAGR of 59.2 per cent.

By the end of the forecast, IDC expects GenAI spending to reach $202 billion, representing 32 per cent of overall AI spending.

According to the report, software will be the largest category of technology spending, representing more than half the overall AI market for most of the forecast.

Spending on AI hardware, including servers, storage, and Infrastructure as a Service (IaaS), will be the next largest category of technology spending.

“IT and business services will see a slightly faster growth rate than hardware with a CAGR of 24.3 per cent. In comparison, AI software will see a five-year CAGR of 33.9 per cent,” said the report.

The industry that is expected to spend the most on AI solutions over the 2024-2028 forecast period is financial services.

The industries that will see the fastest AI spending growth are business and personal services (32.8 per cent CAGR) and transportation and leisure (31.7 per cent CAGR), the report mentioned.