Revenues of generative artificial intelligence offerings across a broad range of categories are forecast to reach $3.7 billion this year and expand to $36 billion by 2028, according to a recent report by S&P Global Market Intelligence.
While companies like Google and Microsoft have been experimenting with generative AI for several years, the wide-scale commercialization of the technology is a more recent phenomenon, with many vendors now offering products that are still in the beta or initial launch phase, according to the study.
“We’re at the very early stages of this market, but it’s evolving very quickly,” Nick Patience, managing analyst of Data, AI, Infosecurity & Risk at S&P Global Market Intelligence, said in an interview.
Generative AI refers to tools capable of producing new content, such as text or images, based on what they’ve learned.
Large software vendors and a flurry of emerging startups are in a race to capitalize on the popularity of ChatGPT, a generative AI tool created by Microsoft backed-Open AI. North America represents the largest market for generative AI, with the greatest number of vendors and developed infrastructure to handle the scale of adoption, the report said.
Datarails, a New York-based software provider, announced in March that it was testing ChatGPT-like capabilities in a financial planning and analysis tool for CFOs. Also, San Francisco-based Brex, which provides corporate expense management tools, said in March that it was launching new CFO tools powered by the same machine learning and natural language processing technology behind ChatGPT.
As the nascent generative AI market explodes, it’s also prompting regulatory concerns in the U.S. and abroad.
“While the technology is moving swiftly, we already can see several risks,” Federal Trade Commission Chair Lina Khan said in a New York Times op-ed piece last month. A handful of powerful businesses control the “necessary raw materials” that startups rely on to develop and deploy AI tools, raising competition questions, she said. And, in some cases, generative AI tools are trained using sensitive, personal data, raising privacy concerns.
The White House and members of Congress are studying policy challenges posed by the market. In the meantime, Khan said the FTC stands ready to police industry players using existing legal authorities.
Overall, the study by S&P Global Market Intelligence analyzed 263 software companies in the world that provide generative AI products, including text, images, audio, and video, according to Patience. Of those, 117 are companies that specialize in text generation, including Jasper, provider of an AI writing tool designed to generate marketing copy and Grammarly, which offers an AI-powered writing assistant, he said.
“In one sense, the whole market kicked off last November, when ChatGPT was launched,” Patience said. Still, despite a flurry of generative AI-powered tools that recently flooded the market, the technology itself isn’t new, he added.
An early example of the technology is BERT, a natural language processing algorithm created in 2018 by researchers at Google, according to the S&P Global Market Intelligence report. “Generative AI capabilities have evolved to encompass a wider array of outputs, and the market has transitioned in a for-profit direction, from research to monetized products and services,” the report said.
Text generators create text-based content such as business articles, poetry, and research papers in response to a prompt, it said. The results are intended to approximate what a human might write or speak given a similar prompt.
The text sector is poised to expand at a compound annual growth rate of 50% from 2023 to 2028, according to the research.
“The challenge for many startups is competition for a focused pool of use cases and user profiles, commonly in sales and marketing, and building a strong enough value-add within the AI stack to justify its position as an interface between a business and foundation model APIs [application programming interfaces],” it said. “These challenges will likely lead to a trimming of the long tail of text generator startups.”
In a Gartner survey unveiled last month, 70% of corporate executives said their companies were investigating or exploring generative AI. Nearly 20% of respondents said their organizations had AI projects in “pilot or production mode.” Another 45% of respondents reported that publicity around ChatGPT had prompted their companies to increase their AI investments.
A KPMG survey released in April found that 65% of executives expected generative AI to have a major impact on their organization in the next three to five years. However, nearly the same number (60%) said they were still a year or two away from implementing the technology due to hurdles such as cost, determining clear business cases, and hiring talent to support implementation.
In addition, cybersecurity and data privacy were top concerns for respondents, at 81% and 78% respectively.