Will the AI Industry Experience Exponential Growth? Bain Predicts a $1 Trillion Market Within Three Years

The rapid proliferation of artificial intelligence (AI) technology is transforming industries and economies, leading to a significant expansion in the global market for AI-related products. According to a recent report by Bain & Company, the market is projected to approach $1 trillion by 2027. In their annual Global Technology Report released on September 25, Bain noted that the market, which includes AI services and hardware, is expected to grow between 40% and 55% annually from last year's $185 billion base. This growth trajectory could yield revenues ranging from $780 billion to $990 billion by 2027.

Driving this momentum are larger data centers, which will train and operate more advanced AI systems. Additionally, increased utilization of AI by businesses and governments to enhance efficiency is expected to fuel further growth. Bain highlighted that the rapid rise in demand for AI products is straining supply chains for essential components, including the chips necessary for these systems. They warned that the combination of sales growth and geopolitical tensions could lead to shortages in semiconductors, personal computers, and smartphones.

The report also indicated that by 2026, demand for upstream chip components like integrated circuit design and related intellectual property could increase by 30% or more, putting pressure on manufacturers. Furthermore, as data center capacities expand from the current range of 50-200 megawatts to over 1,000 megawatts, the costs for large data centers could soar from $1-4 billion to $10-25 billion within five years. Bain stated, “These changes are expected to have a significant impact on the ecosystem supporting data centers, including infrastructure engineering, power generation, and cooling equipment.”

AI has now moved beyond experimentation, with more companies integrating generative AI into their operations. Smaller language models, prized for their efficiency and cost-effectiveness compared to larger models like GPT-4, have gained favor among businesses and governments. Nations such as Canada, France, India, Japan, and the UAE are investing heavily in sovereign AI initiatives, funding domestic computing infrastructure and developing AI models trained on local data.

However, Anne Hoecker, Bain's global technology business leader, cautioned that establishing a successful sovereign AI ecosystem can be both time-consuming and costly.