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IDC predicts AI investment in APAC to reach $49 billion by 2026

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Artificial Intelligence (AI) has emerged as a game-changer for organizations, helping them establish a reliable risk management environment while facilitating informed decision-making.

As per the Worldwide Artificial Intelligence Spending Guide by IDC, the expenditure on AI in APAC (excluding Japan) is anticipated to increase to $49.2 billion by 2026, growing at a compound annual growth rate (CAGR) of 24.5% from 2021 to 2026. This covers expenses related to AI-centric systems, software, services, and hardware.

AI spending

The AI technology market is reaching a crucial point in its evolution, where it must effectively address the challenges of trustworthiness, accountability, and intellectual property (IP) concerns. The current upsurge in demand for generative AI is exacerbating these issues, emphasizing the importance of developing robust solutions.

Top use cases driving AI investment

In the coming years, AI is poised to revolutionize various industries with its numerous use cases, including:

  • augmented customer service agents
  • smart business innovation and automation
  • recommendation and augmentation of sales processes
  • IT optimization
  • fraud analysis and investigation

These five AI use cases are expected to witness a surge in investment, with spending on them projected to increase from $9.8 billion in 2023 to $18.6 billion by 2026.

AI has become a vital component of digital organizations, and IT optimization is one of the fastest-growing use cases, with a compound annual growth rate (CAGR) of 27.5%. This area focuses on optimizing, streamlining, predicting, and automating core IT processes and back-end IT operations.

Financial institutions are the largest contributors to AI spending in fraud analysis and investigation, accounting for 92% of the total expenditure. These AI systems use rule-based learning to detect transactions that indicate fraudulent activity or a heightened risk of fraud in different areas of an organization.

AI use cases

In 2023, hardware will account for over 47% of AI spending. The bulk of this investment will be directed towards servers, which make up 86% of total AI hardware technology spending, with the remainder being allocated for storage.

The second most significant technology is software, which accounts for 34% of total AI spending. Services technology makes up the remaining AI spending, with 77% of the total being directed towards IT services and the rest to business services.

AI spending in APAC

China is leading APAC (excluding Japan) in terms of AI spending, estimated to reach $26.4 billion by 2026 with a CAGR of 20.6%. The significant investment stems from digital transformations and technological advancements such as AI chipsets and 5G networks, prompting widespread adoption of the technology for organizational innovation and resilience against market competition.

Australia follows suit at second place investing significantly into their own AI solutions which are predicted to amount to approximately $6.4 billion by the year 2026 alone. By investing in AI, organizations are striving to stay digitally resilient and innovative during stiff competition and a rapidly changing economy.

At the next place is India, which is rapidly emerging as one of the world’s leading and fastest adopters of Artificial Intelligence, with AI spending of $3.6 billion and a projected CAGR of 34.3%. One of the key drivers of this trend is the desire to enhance quality in areas such as product development, production, supply chain management, and customer service. Other factors contributing to the growing adoption of AI solutions in India include improving business competitiveness and enhancing risk management.

South Korea is the next leading country in AI spending, with an expected investment of $3.5 billion by 2026. This growth is driven by a range of factors, including the demand for AI-based automation technology to streamline repetitive tasks, AI-powered contact centers to improve customer service, and the need to increase business productivity and efficiency.

These trends highlight the increasing importance of AI in driving business innovation and growth around the world.

Source: IDC

Read next: Top 14 digital experience platform (DXP) vendors by Gartner

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