U.S. and China rivalry continues

The AI software market is set to double in value to $64 billion by 2025, according to new figures from analyst firm Forrester.

Forrester’s Global AI Software Forecast 2022 cited increased adoption stemming from increased AI adoption during the pandemic as well as the rise in the number of companies that now offer AI software.

Cybersecurity is the fastest-growing AI software category, with significant investments being made in real-time monitoring and response to mitigate growing cybersecurity threats.

Within the AI software market, Forrester estimates that AI-infused software will see a 22% compound annual growth rate (CAGR) by 2025; AI maker tools, which are used to develop AI applications, will see a CAGR of 18%; and AI-centric software, which runs on AI components, will witness a CAGR of 14%.

Across eight countries (the U.S., China, Japan, France, Germany, Italy, Spain, and the U.K.), AI’s share of software spending will increase from 4.3% in 2021 to 6% in 2025.

The U.S. and China are expected to continue their respective dominance of AI software spending. In addition, more than 80% of annual investments in AI and blockchain technologies will come from the two countries.

Forrester’s report considers Germany as the top European spender on AI software, with $2.4 billion expected to be spent on AI software in 2022. The U.K. and France are expected to spend $2.3 billion and $1.4 billion, respectively, on AI software in 2022.

Those nations, however, considerably lag behind world leaders China and America. Notably, American firms have the most extensive portfolio of AI patent applications and the highest number of patented AI techniques.

“AI has great potential across categories including cybersecurity, process optimization and automation, health, and human capital management,” said Michael O’Grady, a principal forecast analyst at Forrester.

“However, as AI adoption becomes mainstream, enterprises will need to manage its complexity, which includes adhering to responsible AI practices, nurturing the growing pool of AI talent, and the continued evolution of business models.”