In an uncertain economic context, AI demonstrates its resilience
The increase in investment in AI has continued in an uneven economic environment. If Big Tech may be able to weather the storm with well-capitalized balance sheets, what about other key players? As described above, private equity and venture capital firms still see the long-term value of investing in AI and should continue to invest capital.
Mid-market companies have been reassessing their technology spending since interest rates began to rise in 2022. Many have been cautious about spending on growth-oriented technologies, like AI, and these decisions are constantly evolving, especially during times of macroeconomic uncertainty. However, the data suggests that AI adoption spending by non-Big Tech companies is likely to continue for the foreseeable future, even as companies remain cost-conscious.
A recent Gartner report projects that enterprise spending on generative AI will increase from approximately $365 billion in 2024 to $644 billion by the end of 2025, an increase of 76.4%. And while a few large companies will likely corner the market for large language models (LLMs) and functional AI, the many use cases that leverage these LLMs will bring value and opportunity. Mid-market companies, in particular, should look for opportunities to differentiate themselves and create value rather than competing with larger players with significant capital with low or no borrowing costs.
The near-term outlook and future promise of agentic AI also allows mid-market companies to reap the rewards of continued investment in AI. A recent survey of 1,000 business and IT executives in the US, UK, Australia and Japan conducted by PagerDuty indicated that 86% of organizations have deployed or plan to deploy agentic AI in the next two years and on average expect a 171% ROI. Thus, while macroeconomic uncertainty may affect other capital deployment decisions, ROI expectations from AI advances may incentivize even cost-conscious firms to invest in AI.