AI boom will need $6 trillion in annual revenue by 2031 to justify massive compute investment: Report

The report said the key challenge for the AI industry is no longer only building more powerful systems, but ensuring that the economic value created by AI is large enough to justify the capital being deployed into computing infrastructure.

It said, Funding AIs insatiable compute demand would require USD 6 trillion in annual revenue by 2031, and much of the value lies in new innovation beyond employee productivity.

The report also stated that the existing AI applications could generate between USD 1.2 trillion and USD 1.8 trillion in annual revenue. These include consumer AI through subscriptions and advertising, as well as enterprise applications across software development, sales, marketing, customer service and IT operations.

This leaves around USD 4.2 trillion in additional revenue that would need to come from new AI-driven products, services and markets.

The report identified four broad areas that could contribute to this new revenue. The first is the use of AI models to replace search engines and integrate advertising into AI-driven experiences. The second is autonomous everything, including autonomous automobiles, trucks, drones and other forms of industrial automation.

The third area is physical AI, covering simulations, digital twins and robotics that can be used in research and development and manufacturing. The fourth is the creation of products and uses that do not exist today, potentially opening new markets in areas such as drug discovery, mental health and energy generation.

The report also said the huge demand for AI computing has revived the hardware and semiconductor industry. Hardware and semiconductor companies' market capitalisation grew at a 24 per cent compound annual rate between 2020 and 2026, compared with 6 per cent for software.

High-bandwidth memory, advanced packaging and custom silicon are among the areas benefiting from the AI-driven demand for computing capacity.

However, the AI expansion is also creating supply risks. The report said the focus of major players on high-bandwidth memory capacity could reduce investment in other memory products such as DDR and NAND, potentially worsening shortages and raising prices of smartphones and PCs.

The report also highlighted another challenge for companies: turning AI investment into actual business value. It said the speed at which companies can absorb and deploy AI is becoming a new competitive factor, with leading labs investing up to USD 9.75 billion in forward-deployed engineering models to help businesses adopt the technology faster. (ANI)