AI Business Spending Is Surging, But Can It Last? – New Technology

Business investment in generative artificial intelligence (AI)
is surging as companies seek to capitalize on its potential.

In 2024, generative AI business spending jumped to $13.8
billion, a sixfold increase from 2023, according to a recent report
from Menlo Ventures.¹

This 500% increase in generative AI spending suggests that
companies are betting on the emerging technology’s ability to
enhance business productivity by generating code, analyzing large
datasets, and drafting legal documents.

The question now is which investments will deliver lasting value
and which ones may fade as AI hype moderates. Investments tied to
improving core processes — such as supply chain optimization,
predictive analytics and research, forms processing, and customer
experience/journey applications — are more likely to endure
because they address ongoing challenges that directly impact
profitability.

According to the report, the bulk of generative AI investment in
2024 targeted foundation models, which are pretrained. Spending on
foundation models will likely remain higher than before the launch
of generative AI two years ago.

However, investment in foundation models is unlikely to continue
growing at its 2024 breakneck pace of 550%. In some cases,
businesses may find that although foundation models excel at many
tasks, they only offer marginal improvements that don’t justify
their cost.

The degree to which companies continue pouring money into
certain areas — such as generative AI model training and
deployment — hinges on which technologies can boost business
efficiency as well as prove both reliable and effective in
augmenting human productivity.

Overall, the outlook remains largely optimistic. Generative AI
already demonstrated its ability to reshape industries, and
companies that take a strategic, thoughtful approach to adoption
are likely to experience lasting gains.

Footnote

1 “2024: The State of Generative AI in the
Enterprise,” Menlo Ventures (2024).

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