Artificial Intelligence (AI) products and services are expected to experience an annual growth rate of 40-55%, with the global market potentially reaching $990 billion by 2027, according to the latest Bain & Company’s 5th annual Global Technology report.

The report noted that AI will drive data centre growth, with power consumption rising from today's 50-200 megawatts to over a gigawatt. This could increase the cost of large data centres from their current $1-4 billion range to between $10 billion and $25 billion in the next five years. Additionally, the surge in AI-driven demand for graphics processing units (GPUs) could boost the need for certain upstream components by more than 30% by 2026.

“Just as the pandemic created a surge in PC demand, surging demand for AI computing power will strain supply chains for data centre chips, personal computers, and smartphones. These trends, when paired with geopolitical tensions, could trigger the next shortage of semiconductors,” the report adds.

The report explained that if the demand for GPUs in data centres were to double by 2026, suppliers of key components would need to ramp up production, while chip packaging manufacturers would need to nearly triple their output to meet the demand. The growth of larger data centres could drive costs significantly higher in the coming years.

As AI advances, the demand for computing power will increase, leading to a rapid expansion in the scale of large data centres over the next 5-10 years. The report mentioned that AI-related workloads could see yearly growth of 25-35% through 2027.

Bain highlighted that the rise of ‘sovereign’ AI blocs will introduce new challenges for technology companies. Globalisation, which began with the pandemic-era chip shortages, is now extending to concerns over data, security, and AI privacy.

“Establishing successful sovereign AI ecosystems will be time-consuming and incredibly expensive. While less complex in some ways than building semiconductor fabs, these projects require more than securing local subsidies. Hyperscalers and other big tech firms may continue to invest in localised AI operations that will ensure significant competitive advantages,” says Anne Hoecker, head of Bain’s Global Technology practice.

Sales and marketing budgets for software companies have decreased from 41% of revenue in 2022 to 33% in 2024, while research and development (R&D) spending saw a smaller decline, dropping from 21% to 18% of revenue over the same time frame, it adds.

The report highlights that ongoing regulatory challenges have shifted tech companies' M&A (merger and acquisition) focus from scaling up to pursuing ‘scope deals,’ which are transactions aimed at acquiring new capabilities, products, or entering new markets.

Global AI market

Global AI market set to soar to $990 bn by 2027: Bain