AI Market Competition Intensifies: Trust, Governance, and Regional Growth Drive the Future
Global market players competing for a larger share of the artificial intelligence (AI) space will need to provide customers with differentiated business value, particularly in areas such as trustworthiness.
Companies will aim to distinguish themselves as organizational spending on AI increases, fueled by growing interest in generative AI (Gen AI).
According to research firm IDC, global enterprise spending on Gen AI solutions—including software, hardware infrastructure, and services—is forecast to exceed $19.4 billion, with expectations that this figure will more than double this year and reach $151.1 billion by 2027, at a compound annual growth rate (CAGR) of 86.1% from 2023 to 2027.
In the Asia-Pacific region, IDC predicts an “unprecedented surge” in Gen AI adoption, with spending projected to reach $26 billion by 2027, growing at a CAGR of 95.4% from 2022 to 2027.
China currently leads in Gen AI adoption, with 83% of businesses using the technology, according to a study commissioned by SAS. This is compared to 65% in the US, 70% in the UK, and 63% in Australia. However, Stephen Saw, managing director at Coleman Parkes Research, noted that while China leads in adoption, the US has a slight edge in implementation, with 24% of organizations fully adopting Gen AI tools, compared to 19% in China.
The US remains dominant in AI infrastructure, foundational research and development, startup ecosystems, and venture capital funding, according to Charlie Dai, Forrester’s vice president and principal analyst for technology architecture and delivery. He highlighted the US’ stronghold in hardware chip design, fabrication, integrated systems design, and cloud infrastructure.
While China is rapidly advancing in foundation model development, particularly for Chinese languages and industry-specific applications, Europe is leading the way in AI regulations, having passed the AI Act, the first comprehensive law on AI governance.
Dai believes that the global market is large enough to accommodate leading AI players from both China and the US. However, he also pointed to growing tech protectionism, which could lead to increasingly segregated global tech markets, with countries seeking digital sovereignty.
To gain a competitive edge, companies will need to focus on offering differentiated business value, particularly through AI governance. Addressing privacy concerns, ethical issues, and ensuring responsible AI use will allow businesses to stand out in the market and build trust with customers. Dai emphasized that effective AI governance can improve customer trust, preserve corporate values, and drive revenue growth.
The SAS study revealed that only 10% of organizations feel fully prepared to comply with impending AI regulations, and just 5% have implemented reliable systems to measure bias and data privacy risks in large language models (LLMs).
Bryan Harris, SAS executive vice president and CTO, remarked that businesses must move past the hype surrounding Gen AI and focus on purposefully implementing the technology to deliver repeatable and trusted business results. Research from McKinsey suggests that Gen AI could contribute between $2.6 trillion and $4.4 trillion annually to the global economy, boosting AI’s overall impact by 15% to 40%.
Despite the growth opportunities, some regions may face barriers. The US Department of the Treasury recently proposed rules to restrict or require notification of investments in AI and other technology sectors in China, a move aimed at safeguarding national security. These restrictions have led companies like Intel and Nvidia to develop China-specific AI chips to comply with US export sanctions, while OpenAI cut access to its API from China.
Dai noted that US restrictions on China’s access to AI chips and technology will slow the pace of AI innovation in China, particularly in R&D efforts and AI application startups. However, it could also strengthen China’s resolve to accelerate local R&D for technology self-reliance. Chinese tech companies, such as Alibaba Cloud, Baidu AI Cloud, Tencent Cloud, and Huawei Technologies, are expected to play key roles in this effort.
Chinese tech companies are already stepping in to fill the gap left by OpenAI’s exit from the market. Baidu and Alibaba Cloud are offering migration services and incentives to encourage developers to move to their local Gen AI platforms, such as Baidu’s Ernie and Alibaba’s Tongyi Qianwen.
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