Artificial Intelligence: Market Size, Growth, Trends & Projections
It’s no secret that, over the past decade, artificial intelligence (AI) has taken the world by storm.
Artificial intelligence is the machine simulation of human intelligence through programming, and it has permeated nearly every aspect of our lives – from navigation apps and smart homes to every Google search. As an angel investor with a focus on technology, I’m extremely interested in finding and funding these kinds of world-changing AI solutions.
Here’s what to know about the AI market and trends to watch.
The State of Artificial Intelligence
Over the past three years, the artificial intelligence industry has grown astronomically. From $27.23 billion in 2019, the industry grew to $29.86 billion in 2020 and then hit $58.3 billion in 2021, and this growth will only continue.
Today, AI has proved itself to be the most significant revolutionary component of the next digital era. AI is being integrated into every kind of program and machine out there, from self-driving cars to life-saving medical equipment. There are several main drivers of this growth, including the proliferation of connected devices, and rising adoption of the Internet of Things (IoT), and the urgent need for AI-based healthcare programs and tools due to the COVID-19 pandemic.
The Effects of Covid-19 on AI
The healthcare industry has played a big role in the growth of the AI industry and will benefit significantly from the AI applications developed as a result of the COVID-19 pandemic.
One of the primary ways AI has supported the healthcare industry is in electronic health records. AI can analyze incredible amounts of data stored on electronic health records (EHR) to better predict patient outcomes.
However, the coronavirus led all industries, not just healthcare, to develop AI-based devices across various sectors, including retail and manufacturing, to reduce transmission. In retail, for example, more consumers have become reliant on AI-based e-commerce product recommendations to reduce the need to visit physical retail locations.
Artificial Intelligence Market Size 2021
The artificial intelligence market size reached $58.3 billion in 2021 and is projected to keep climbing at a compound annual growth rate (CAGR) of 33.2% to reach $266.92 billion by 2027.
What’s Happening in AI? Insights By Industry
Artificial intelligence has become the top innovator across industries, but its impact looks different in each sector. Here’s what I see happening today and in years to come:
- AI-based solutions for e-commerce fraud detection
- Investment in AI-powered micro-fulfillment infrastructure to offer more efficient, speedy deliveries
- Reducing or even eliminating grocery store waste
- First-party data analytics strategies due to growing privacy concerns
- Predictive analytics to optimize digital marketing
- AI chatbots to reduce the need for in-store associates
- Increased adoption of banking digitization
- Rise of AI chatbots for loan approvals, investment advice, etc.
- Increased collaboration between financial institutions
- Increased government funding for AI
- Improved customer service through AI-mined data insights
- Detecting and assessing risks and fraud
- Improvement of anti-money laundering processes
- Facilitation of legacy healthcare systems to communicate with one another to provide more detailed and comprehensive patient information through EHR
- Application of machine learning techniques to extract insights from EHR data
- Utilization of machine learning to predict disease or disorder before it manifests
- Increased availability of telemedicine with AI-based chatbots
IT & Telecom
- Self-optimizing networks based on traffic information
- Predictive analytics to monitor equipment and anticipate failure
- Virtual assistants to manage massive support request volumes and promote self-service options
- Utilization of robotic process automation (RPA) for greater back-office efficiency
- Rise of payment-by-vehicle with improved data and security measures
- Auto-retail partnerships, especially with software startups
- Brand-specific AI partnerships through integrations or proprietary technology, like Tesla
- Improvement of voice engine optimization, mainly increasing AI responsiveness
- Advancement in AI-based privacy and auto security
- AI-based scoring to drive deep engagement
- Use of predictive personalization to develop personalized content strategies
- Segmentation of large amounts of data
- Development of personalized pricing strategies based on supply and demand (much like Uber and Postmates)
- Rise of chatbots for both enterprise and small business use cases
- Continued improvement of computer visualization
- Surge of new data integrated with the Internet of Things (IoT) by AI
- Utilization of deep learning for defects detection
- Utilization of machine learning for predictive maintenance to minimize production delays
- Rising use of digital twins for process evaluation and real-time diagnostics
- Automation of administrative tasks such as grading
- Collaboration between AI and teachers to create more opportunities for academic personalization
- Development of smart content through digital learning interfaces
- Enhanced educational accessibility through AI, especially for foreign speakers or those with visual impairments
Best AI Trends to Watch Out For (or Be A Part of)
As an angel investor with an interest in AI, there are several trends I’ve been following and anticipate seeing more growth in over the coming years. You can sit back and watch AI take on the world by storm – or you can be a part of it.
These are the best AI trends to keep an eye out for in 2021 and beyond:
- Leading market participants like Amazon, Inc. and Microsoft Corporation have started integrating services like cloud computing with AI to expand their capabilities, but now startups are spending more of their income fusing these services to stay competitive in the rapidly evolving market. This will push the boundaries of the AI market and open new revenue opportunities within it.
- Significant growth in the IT industry and the rise of cloud-based devices around the world, along with the increasing digitalization, has led to an uptick in the utilization of AI systems to analyze massive amounts of data, which can then be used to improve the consumer experience.
- Social media and e-commerce platforms are relying on AI-based systems to optimize customer engagement and improve consumer satisfaction with their digital experience. This will only continue, especially with the use of predictive recommendations bridging the gap between social media and e-commerce.
- There will be a continued improvement of natural language processing (NLP) and machine learning to enhance conversational AI technology such as chatbots with the ultimate goal of near-human level interaction. We’ll see more self-service customer support options powered by AI technology to reduce massive call volumes and increase customer satisfaction.
- The general shift to a hybrid workplace will increase the need for more AI systems to handle high-volume, repetitive tasks to allow the human workforce to work remotely and more collaboratively with automated bots.
AI Growth and Predictions
The AI market is skyrocketing, going from a $29.86 billion market size value in 2020 to $58.3 billion in 2021. Experts predict these numbers will rise even more drastically, with a projected CAGR of 33.2% and a market value of $266.92 billion by 2027.
As with any growing market, there will be challenges and restraints along with the opportunities that arise. While new AI-powered systems are being developed and integrated rapidly, the number of AI experts is not growing quite as fast, creating a gap between our technology and the workforce we have to develop, maintain, and improve it. Additionally, we face the challenges of data security and privacy, which are significant concerns for consumers. AI technology developers will need to demonstrate best practices for security and privacy, including using good data hygiene, giving users more data control, and securing AI decision-making systems.
Despite these challenges, experts project that we will continue to see incredible growth in the market. The cloud segment of the market, in particular, will see a higher CAGR during the forecast period of 2021-2027 as compared to other segments, offering benefits such as reduced operational costs, high scalability, and easy deployment.
The marketing and sales market segment will also see distinct expansion, accounting for the largest market size during the forecast period. Marketing and advertising companies will take advantage of the new profitable opportunities driven by programmatic advertising that increase their conversion.
Regionally, North America is predicted to hold the largest market share, while the Asia-Pacific region will account for the highest CAGR over the period.
New opportunities are abounding in the AI market, and entrepreneurs with a brilliant and in-demand AI-based solution will be the ones to reap the rewards.
As an experienced tech investor, it’s clear there has never been a more opportune time to break into the artificial intelligence market. It’s rapidly re-shaping the operations of nearly every industry, from analyzing massive amounts of health data and predicting illness before its onset to optimizing and personalizing everything about the consumer retail experience. To those who want a front-row seat in the next technological revolution, this is your time to shine.
Macdonald Ventures helps startup founders with innovative solutions – many of which are powered by AI – create successful businesses that push boundaries, disrupt and outperform old systems, and challenge the way industries operate.
If you have a world-changing AI business idea, get in touch with MacDonald Ventures.