Applied AI Market Size, Share, and Industry Analysis, By Component (Hardware, Software, and Services), By Deployment (On-premise and Cloud), By Technology (Machine Learning, Natural Language Processing, Computer Vision, and Others), By Industry (BFSI, Healthcare, Government, IT & Telecom, Retail & E-commerce, Manufacturing, and Others), and Regional Forecast till 2032

The global applied AI Market is experiencing substantial growth due to advancements in AI technology, more data availability, and a rising awareness of AI’s ability to reshape industries.

According to the 2022 AI Index Report from Stanford University, private investments in AI surged to USD 93.5 billion in 2021, more than double from 2020. This influx of investment has enabled numerous companies to develop effective applied AI solutions that are now accessible to businesses. Industry specialists indicate that investments in Applied AI should ideally target a specific market niche that has related opportunities. Experts believe that a company focused on a niche within the USD 15 trillion total addressable market could potentially have a serviceable market ranging from USD 1 billion to USD 3 billion. Applied AI enhances efficiency by cutting costs, time, and effort. Recently, nearly 90% of participants in a McKinsey survey reported reductions in costs, along with revenue increases of up to 75%.

Applied AI Market Driver

Increasing Adoption of AI to Drive the Market Growth

The adoption of artificial intelligence solutions has been increasing on a daily basis across the globe. The pandemic changed the way businesses operated, further pushing these enterprises to adopt AI tools to optimize their processes. Regardless of the size of the businesses, companies adopted AI technologies across all its industry verticals. As per Fortune Business Insights the market size of Artificial Intelligence is estimated to reach around USD 2,740.4 billion. According to Simplilearn, by 2030, Artificial Intelligence will add USD 15.7 trillion to the world's GDP, boosting it by 14%.

Applied AI Market Restraint

Integration Complexity and Regulatory Issues to Hamper Market Growth

Integrating AI into current systems can be complex and expensive, posing a barrier for numerous businesses. Dealing with the regulatory environment surrounding AI technology can be difficult, as legislation can differ significantly between areas and is always changing. As a result, the complexity of integration and regulatory challenges can impede market growth.

Applied AI Market Opportunity

Adoption of Applied AI in Smart Manufacturing and E-commerce is expected to boost the Market Growth

The rise of applied AI in e-commerce and smart manufacturing is presenting strong opportunities for market players. AI-based product recommendations, supply chain management, and price optimization help e-commerce companies flourish. The French delivery firm Chronopost experienced an 85% boost in sales revenue after leveraging AI-driven campaigns during the 2022 holiday period. Utilizing AI-powered forecasting in supply chain management can cut errors by up to 50%, significantly reducing lost sales and product shortages by as much as 65%.

AI-driven predictive maintenance and quality assurance are minimizing downtime and transforming manufacturing processes, leading to its increasing adoption in smart manufacturing.

Segmentation

Key Insights

The report covers the following key insights:

• Micro Macro Economic Indicators
• Drivers, Restraints, Trends, and Opportunities
• Business Strategies Adopted by the Key Players
• Consolidated SWOT Analysis of Key Players

Analysis by Component

By component, the market is divided into hardware, software, and services.

Software is estimated to grow with highest CAGR during the forecast period as continuous advancements in AI software, such as the development of more sophisticated machine learning models and the integration of AI with other emerging technologies, such as IoT and big data, are driving the segmental growth.

Analysis by Deployment

By deployment, the market is divided into on-premise and cloud.

Cloud dominated the market in 2023, as cloud solution has become essential component of modern business that offers a flexible and scalable solution for data management. Also, advancements in technology, such as the growth of the Internet of Things (IoT) and the increasing use of big data, have created new opportunities.

Analysis by Technology

By technology, the market is divided into machine learning, natural language processing, computer vision, and others.

Machine Learning dominated the market in 2023, as machine Learning algorithms are at the heart of predictive analytics, enabling businesses to make data-driven decisions that enhance operational efficiency and personalized customer experiences. According to Fortune Business Insights, the Machine Learning Market is expected to reach around USD 225 billion by 2030.

Analysis by Industry

By industry, the market is divided into BFSI, healthcare, government, it & telecom, retail & e-commerce, manufacturing, and others.

The healthcare industry is estimated to showcase significant growth due to the rising number of artificial intelligence applications specifically targeting this industry. AI is being utilized by healthcare institutions to enhance the efficiency of various processes, ranging from administrative tasks to patient care. According to an IBM study, approximately 64% of patients are open to the use of AI for 24/7 access to answers that support nurses provide.

Regional Analysis

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In terms of geography, the global market is segmented into North America, Europe, Asia Pacific, South America, and the Middle East & Africa.

In 2023, North America held the largest share, as the region has consistently led in AI research, driven by a robust innovation ecosystem supported by both the private and public sectors. Through these efforts, companies are looking to influence the overall direction of academic research. For instance,

• February, 2023 - The U.S. Navy collaborated with IBM, Four, and Cube wise intending to launch a new programme, Class 1 Common Operating Picture (CL1P). With the collaboration with these strategic industry partners, the U.S. Navy aims to optimize fleet readiness.
• February, 2023 - IBM partnered with NASA to empower researchers in analyzing and drawing insights from large data of Earth observations. This partnership will help researchers to gain latest findings on Earth’s climate through the power of artificial intelligence technologies.

The U.S. is at the forefront in the region, driven by rising investments from businesses, with a notable USD 36.7 billion directed toward AI companies in 2023, an increase from USD 22.7 billion in 2022. The U.S. remains a leader in the global AI startup landscape, representing a significant share of worldwide AI startup funding. There are around 5,509 AI startups operating within the country.

Asia Pacific is expected to lead the AI market in the coming years, driven by a rise in artificial intelligence (AI) investments. These investments experienced a significant boost during the pandemic, as the crisis transformed business operations, countries in the region adopted AI technologies accordingly. Specifically, AI spending in APAC are estimated to reach USD 45 billion by 2024, and grow to USD 110 billion by 2028. China is at the forefront in the region, showing a 59% increase in AI initiatives and progressing more rapidly due to higher levels of investment, favorable regulations, and a more robust AI talent pool and infrastructure.

Europe also holds significant potential in the global applied AI market In January 2024, the EU launched initiatives aimed at assisting European start-ups and small to medium-sized businesses in developing trustworthy AI by providing access to funding through programs, such as Horizon Europe, Digital Europe, the EIC accelerator, and InvestEU.

Key Players Covered

The global applied AI market is fragmented with the presence of a large number of group and standalone providers.

The report includes the profiles of the following key players:

• Alphabet (U.S.)
• Microsoft Corporation (U.S.)
• AWS (U.S.)
• NVIDIA (U.S.)
• Baidu (China)
• OpenAI (U.S.)
• Huawei Technologies (China)
• C3.ai (U.S.)
• Alibaba (China)
• Tecent Holdings (China)

Key Industry Developments

• In June 2024, Baidu, the leading search engine in China, introduced an upgraded version of its AI model, known as Ernie 4.0 Turbo, to maintain its position in the competitive Chinese AI landscape. This latest model will be accessible to users via mobile applications and web platforms, while developers can incorporate the technology through Baidu's Qianfan AI platform.
• In January 2024, Google launched Lumiere, a cutting-edge AI model. Lumiere is a text-to-video diffusion model designed to generate short video clips from text descriptions.