IDC has forecast a massive 59.3% increase in cognitive and AI spend this year, with revenues expected to hit $12.5bn.

The growth is expected to continue through to 2020, when revenues are expected to be more than $46bn at a compound annual growth rate of 54.4%.

IDC research manager for customer insights and analysis Marianne Daquila said heavily regulated markets like banking and securities investment services are among the early growth drivers and will collectively represent a quarter of worldwide cognitive and AI solutions spend.

Daquila said: “Stringent compliance requirements are key drivers for these industries as they seek new innovations in fraud and risk detection.

“Additionally, companies in this sector are adopting cognitive-based program advisors and recommendations to better match products with clients.”

Daquila noted that manufacturing, retail and healthcare are also expected to see very strong spending growth over the forecast period.

IDC is forecasting cognitive applications to be the largest area of spend this year, with $4.5bn in revenue.

The category includes cognitively-enabled process and industry applications that automatically learn, discover and make recommendations or predictions.

IDC said this category will also lead growth throughout the forecast period, with a five-year CAGR of 69.6%.

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Cognitive/AI software platforms, which offer the tools and technologies to analyse, organise, access and provide advisory services depending on structured and unstructured information, is predicted to see investments of about $2.5bn this year.

Cognitive-related IT and business services will see investments of over $3.5bn, IDC said, with dedicated server and storage purchases totalling $1.9bn.

IDC said the cognitive/AI use cases that will see the greatest levels of investment this year will be quality management investigation and recommendation systems; diagnosis and treatment systems; automated customer service agents; automated threat intelligence and prevention systems; and fraud analysis and investigation.

Combined, all the five categories are expected to account for about half of all the spend this year.

Over the forecast period, public safety and emergency response and pharmaceutical research and discovery are expected to see the greatest CAGR, at 85.5% and 74.2% respectively.

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Looking at regions, the US will spend the most, nearly $9.7bn, on AI in 2017 with Europe, the Middle East and Africa (EMEA) taking the number two spot. By 2020, Asia/Pacific will occupy the second position, said IDC.

IDC research director for cognitive systems and content analytics David Schubmehl said Cognitive/AI systems are quickly becoming a key part of IT infrastructure and all enterprises need to understand and plan for the adoption and use of these technologies in their organisations.

“Intelligent applications based on cognitive computing, articifical intelligence and deep learning are the next wave of technology transforming how consumers and enterprises work, learn and play,” Schubmehl said.