The Artificial Intelligence (AI) sector is poised for a massive expansion, predicted to reach a market value of $225 billion by 2027, as stated by UBS.
What Happened: In their latest note published on Wednesday, UBS forecasts exponential growth in the AI industry, from a $2.2 billion market in 2022 to a staggering $225 billion by 2027, Business Insider reported. This signifies a near 152% compound annual growth rate.
The bank further predicts a 15-fold surge in AI sector revenue, climbing from $18 billion in 2022 to $420 billion in 2027, marking a 40% upward revision from UBS’s previous estimates.
The “App Store moment for the AI industry has arrived,” UBS declared, referencing the launch of applications such as copilots and features from OpenAI. The application sector is anticipated to witness a 138% CAGR due to rising demand for AI software.
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Additionally, clearer AI infrastructure spending is projected to sustain the tech industry’s multi-year momentum, with the segment estimated to grow from $25.8 billion in 2022 to $195 billion in 2027.
“This will likely make AI one of the fastest-growing and largest segments within global tech and arguably the ‘tech theme of the decade,” the note stipulated.
As per UBS, hardware chips and GPUs used in AI training are expected to be the main beneficiaries of the increased spending, potentially offering a tenfold boost to semiconductor and platform firms and elevating industry revenues from $15.8 billion to $165 billion.
UBS also indicated that despite potential apprehensions about rising regulatory rhetoric around AI, early rule implementation could be more beneficial than late-growth restrictions.
Why It Matters: AI technology witnessed a reality check, facing ‘peak AI hype,’ and the need to prove its worth on the bottom line became imperative as investors sought assurance that the billions invested in AI development could yield a return.
A tech analyst at Wolfe Research, Alex Zukin, noted, “We are at peak AI hype with a likely slide into the trough of disillusionment, as actual GenAI revenue dollars take longer to materialize.”
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