According to the most recent International Data Corporation (IDC) Worldwide Semiannual Artificial Intelligence Tracker, worldwide revenues for the artificial intelligence (AI) market, including software, hardware and services for both AI centric and AI non-centric applications, totaled $383.3 billion in 2021, an increase of 20.7% over the prior year. IDC expects the AI market’s value will reach nearly $450 billion in 2022 and maintain a year-over-year growth rate in the high teens throughout its five-year forecast.

“Across all industries and functions, end-user organizations are discovering the benefits of AI technologies, as increasingly powerful AI solutions are enabling better decision-making and higher productivity,” Rasmus Andsbjerg, associate vice president of data and analytics at IDC, said. “The reality is, AI offers solutions to everything we are facing at the moment. AI can be a source for fast-tracking digital transformation journeys, enable cost savings in times of staggering inflation rates and support automation efforts in times of labor shortages.”

AI software again accounted for the largest share the overall AI market in 2021. Combined, the four AI software categories — AI applications delivery and deployment, AI applications, AI system infrastructure software and AI platforms — delivered more than $340 billion in market value in 2021, with AI applications representing nearly half the total. AI platforms delivered the strongest year-over-year growth at 36.6%, albeit from a smaller baseline.

Within the AI applications category, AI customer relationship management applications and AI enterprise resource management applications each delivered about 16% of the category total. The remainder was delivered by the myriad other AI applications available in the market. With nearly 300 companies vying for opportunities to gain share, the AI applications market remains highly competitive.

IDC’s AI tracker also showed that AI centric applications, in which AI technologies are central and critical to the function of the application, continued to slowly grow their share of the AI software market. In 2021, AI-centric applications captured 12.9% of the market, up 29.3% year over year. The remainder of the market was held by AI non-centric applications, where AI technologies are integral to certain workflows of the application, but if those technologies were removed, the application would still be able to function.

Similarly, the deployment of AI software to the cloud continues to show steady growth. In 2021, 47.3% of AI software purchases were deployed to the public cloud, an increase of four percentage points over 2020 and 8.4 percentage points over 2019. IDC expects cloud deployment of newly purchased AI software to surpass on premises deployments in 2022.

The AI services market experienced a total value increase of 22.4% year over year to $24 billion in 2021. Client demand for expertise in developing production-grade AI solutions helped the AI IT services category grow 21.9% year over year to $18.8 billion. The AI business services category grew 24.2% year over year as organizations sought assistance on AI governance, business process and talent strategies.

AI hardware was both the smallest ($18.8 billion) and fastest growing (38.9% year-over-year growth) segment of the AI market. The hardware growth was driven by efforts to build dedicated AI systems capable of meeting the increased compute and storage demands of AI models and data sets. While both AI servers and AI storage delivered strong growth in 2021 — 39.1% and 32.9% respectively — server purchases were notably larger at $15.6 billion.