These are the 3 'broad pockets of growth' for AI, expert says

A new report from Bain & Company forecasts substantial growth in the AI product market in the coming years. The firm projects that the market for AI-related hardware and software could expand by 40-50% annually, reaching approximately $990 billion by 2027.

Bain & Company global technology and cloud services practice chairman David Crawford joins Market Domination to dig into the bullish projection and discuss the outlook for AI as it seeps into all corners of the market.

Crawford sees three "broad pockets of growth" for AI. First, large hyperscalers building out their capabilities are generating "enormous" demand. This demand, he says, "works its way back through the supply chain and creates shortages in a spectrum of spaces."

The second pocket for growth lies in enterprise adoption. Crawford explains, "We know the trends are smaller models, more specialized models, open source, etc., but likewise requires computational capability. In some cases, they're using special-purpose compute and so forth."

Finally, the third area for growth will likely be seen in independent software vendors that build AI capabilities for their products and run them in their own data centers.

As generative AI becomes more widely adopted, Crawford believes there will be increased interest in sovereign ownership, control, and domiciled data centers. He tells Yahoo Finance, "It's broadly perceived that AI will be quite different and that it'll control culture, access to health and welfare, things like that. And so we think that the sort of state interests will play a much bigger role in the ultimate location of where all this occurs."

Watch the video above to also find out how companies are spending on AI.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Melanie Riehl

Video transcript

The chip sector in general has been getting a boost this week.

It's in part my, it's in part a new report from Bain and company which highlights that the market for A I products and services could hit up to $990 billion by 2027.

Talk more about that is David Crawford.

He's been and company Global Technology Cloud Services Practice chairman and one of the authors of that report that got so much attention this week.

So David, thank you so much for being here.

Happy to be here.

Thanks for having me.

So as you know, there has been an enormous amount of attention on this gen A I wave and presumably that's why you guys decided to dig a little bit more deeply into it.

I'm curious as you look at that up to 55% annual demand increase through 2027 where you see that coming from specifically how that's gonna sort of play out and also how it's gonna change over time.

Yeah, great question.

I, I think we see uh three kind of broad pockets of growth.

One is that the halo uh and high end of the market where the large hyper scalars are, are racing to kind of uh you know, build out the best capabilities that's generating an enormous amount of demand that works its way back through the supply chain and creates um you know, just uh shortages in a, in a spectrum of spaces.

The second is enterprise adoption where, you know, we know that trends are smaller models, more specialized models, open source, et cetera, but uh likewise requires computational capability.

In some cases, they're using special purpose compute and so forth.

That that's the second big pocket.

And then the third is the uh you know, the independent software vendors themselves building these capabilities directly into their products and running them in their own data centers.

Uh So between the three, there's just actually a lot of demand and, and those three will interact over the coming years as well.

Do you see um A is being sort of fragmented looking ahead uh David globally, meaning is it gonna be um developed and deployed very differently depending on the country geographies?

Yeah.

Uh uh Important question.

Uh We think relative to say something like a cloud, a cloud disruption or big data, there will be more uh interest in uh sovereign ownership, sovereign control, sovereign uh domicile data centers and so forth because, you know, it's broadly perceived that A I will be quite different in that it'll, it'll control culture, access to health and welfare, things like that.

And so, uh we think that the, the uh sort of uh state interests will play a much bigger role in the ultimate location of where all this occurs.

I I was also struck by some of your research in this report on the size of different enterprises and what they're spending and, and how much that spending has changed over the past year and you know, the bulk of enterprises out there on the smaller side.

So they are spending less as a function of their size.

But are they going to be left behind?

Are they spending enough?

How are you thinking about that?

Yeah, we'll, we'll see as time tells that.

Yeah, we were astonished to see the rate at which, uh for example, in the report we published, the number of companies are spending over $100 million in our annual, it budget alone on, on A I and with large enterprises that's doubled, but it's not uh confined uh specifically to large enterprises, smaller enterprises, whatever level they are spending at has actually doubled as well.

And so, uh, uh you can pick any kind of uh spend or it budget threshold and, and they're, they're almost uniformly increasing their spend.