Companies Continue to Ramp Up Their Spending on AI
The global movement towards artificial intelligence (AI) has become a powerful force. Though still in its relative infancy, the world is already seeing tremendous advancements in science, medicine, finance, engineering, research & development and the arts. With each passing day, AI technology continues to transform our daily lives as well as the broader global economy.
It’s of little surprise that over the past few years, business spending on AI technology has soared. But based on recent data, the global push towards AI might be growing at an even faster pace than originally thought.
According to a recent survey by the international consulting firm McKinsey, in 2024, 78% of all organizations used AI in at least one of its business functions. That’s up from the 55% reported in 2023. In 2017, just 20% of companies used AI in at least one of its business functions. More importantly, the use of AI is expected to rapidly increase. McKinsey notes that 92% of the companies surveyed plan to increase their AI spending over the next three years.
But we’re not just seeing growth in the number of new companies using AI. According to McKinsey, for companies that already use AI, we’re also seeing a rapid expansion of AI within their operations.
In 2023, 16% of companies said they used AI in three or more of their business functions, last year, that number jumped to 45%. Likewise, in 2023, just 6% said they used AI in four or more of their business functions. In 2024, that number nearly quadrupled to 28%. As the survey suggests, corporate America is embracing an across-the-board surge in AI within the workplace.
The amount of money being spent on AI technology and related infrastructure is truly staggering. To put this in perspective, in 2023, according to data from Statistica, global spending on AI reached $154 billion. In and of itself, that’s a lot of money. However, this year, just four companies – Meta, Amazon, Alphabet and Microsoft – are expected to spend a combined $320 billion on AI. Again, that’s just from four companies. Amazon alone this year is expected to spend around $100 billion. By the end of the decade, annual global spending on AI is projected to reach $1 trillion.
Just a few years ago, AI was used almost exclusively by larger companies who had the capital and resources to invest in this new technology. But today, there’s a number of low-cost, or even free AI tools that small businesses can use to improve their efficiencies.
A joint survey by Intuit and the Initiative for a Competitive Inner City found that small businesses tend to use AI tools primarily to speed up or automate routine tasks. The No. 1 use reported in the survey was data analysis, cited by 26.8% of respondents. Rounding out the Top 5 uses are writing marketing materials (25.2%), drafting emails and communications (23.4%), drafting blog posts or newsletters (22.7%) and summarizing web content (22.7%).
For smaller companies, they can afford to be more methodical in how they incorporate AI technology into their business. But for many of the global Fortune 500 behemoths, the AI arms race has instilled a “fear of falling behind.” That if they aren’t investing millions, or perhaps billions of dollars in AI, their competitors most likely are.
The world’s largest and most powerful companies are using AI to drive new and innovative products and services to the global consumer marketplace. Without question, the AI arms race is here and it’s a costly endeavor. If a company falls behind in this race, they risk losing their customer base. But to keep pace will require spending vast sums of money. And so far, companies appear more than willing to keep their pocketbooks open.
Mark M. Grywacheski, Investment Advisor
Quad Cities Investment Group is a Registered Investment Adviser.
This material is solely for informational purposes. Advisory services are only offered to clients or prospective clients where Quad Cities Investment Group and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Quad Cities Investment Group unless a client service agreement is in place.
