Some of the biggest companies in the tech sector are making major bets on artificial intelligence (AI), also often called deep learning. Alphabet Inc. (NASDAQ: GOOGL) and Apple Inc. (NASDAQ: AAPL) lead in acquiring smaller companies, but there are plenty of big players.
Why the gold rush? According to a report out Wednesday morning from IDC, worldwide revenues for cognitive and AI systems will rise 59.3% this year to $12.5 billion and global spending on AI will explode at a compound annual growth rate (CAGR) of 54.4% through 2020 when revenues will top $46 billion. That’s enough to get anyone’s attention.
Of this year’s total spending, some $4.5 billion is targeted at cognitive applications that automatically learn, discover and make recommendations or predictions. Cognitive applications are expected to see a CAGR of 69.6% over a five-year period.
IDC research director David Schubmehl noted:
Intelligent applications based on cognitive computing, artificial intelligence, and deep learning are the next wave of technology transforming how consumers and enterprises work, learn, and play. These applications are being developed and implemented on cognitive/AI software platforms that offer the tools and capabilities to provide predictions, recommendations, and intelligent assistance through the use of cognitive systems, machine learning, and artificial intelligence. Cognitive/AI systems are quickly becoming a key part of IT infrastructure and all enterprises need to understand and plan for the adoption and use of these technologies in their organizations.
In addition to Google, which paid $600 million for U.K.-based DeepMind Technologies in 2014 and has made 11 acquisitions since 2013, and Apple, which has made a total of 7 acquisitions of AI-related firms, Intel Corp. (NASDAQ: INTC), Microsoft Corp. (NASDAQ: MSFT) and Facebook Inc. (NASDAQ: FB) have also made multiple acquisitions of AI technology firms. International Business Machines Corp. (NYSE: IBM) has made three acquisitions and has been pushing its Watson technology hard for some time now.
Non-tech firms are also making acquisitions. Ford Motor Co. (NYSE: F) recently paid $1 billion for a one-third stake in Argo AI and General Electric Co. (NYSE: GE) acquired Bit Stew and Wise.io last November.
IDC research manager Marianne Daquila noted which sectors are most likely to spend the most on AI:
Heavily regulated markets such as banking and securities investment services are among the early growth drivers. Collectively, these two financial industries will represent a quarter of worldwide spending on cognitive/AI solutions. Stringent compliance requirements are key drivers for these industries as they seek new innovations in fraud and risk detection. Additionally, companies in this sector are adopting cognitive-based program advisors and recommendations to better match products with clients. Elsewhere, manufacturing, retail, and healthcare are also expected to see very strong spending growth over the forecast period.
Of the projected $12.5 billion in 2017 spending, U.S. firms are expected to spend nearly $9.7 billion.