Business Spend On GenAI Jumps 500% But Nearly Half Prefer Open-Source

Artificial intelligence (AI) and generative artificial intelligence (GenAI) have reshaped and revolutionized the world—there’s no denying this.

These revolutionary technologies have impacted people professionally and personally and have brought invaluable benefits to businesses in the form of boosted productivity, quicker turnaround, and reduced expenses.

Seeing these benefits enhance their operations, businesses are investing a lot more to streamline their workforce by adopting AI and generative AI.

How much exactly are they pouring into it? That’s a question US-based venture capital firm Menlo Ventures has set out to figure out.

As per their report titled 2024: The State of Generative AI in the Enterprise, which included participation from 600 US enterprise leaders business spending on GenAI has grown by 500%.

This spike includes a rise from $2.3 billion in 2023 to $13.8 billion in 2024.

However, this figure represents a combined increase in investment. When it comes to breaking down this amount, it was found that the rise per category varied.

Foundation models witnessed a 6.5x year-on-year (YoY) increase, going from $1 billion in 2023 to $6.5 billion in 2024, which marked the most significant rise in terms of money.

The others included:
 

• Training & deployment: 3.8x YoY increase, going from $600 million to $2.3 billion.

• Data & infrastructure: 8.0x YoY increase, going from $50 million to $400 million.

• Vertical AI: 12.0x YoY increase, going from $100 million to $1.2 billion.

• Departmental AI: 9.0x YoY increase, going from $200 million to $1.8 billion.

• Horizontal AI: 5.3x YoY increase, going from $300 million to $1.6 billion.

When it came to applying GenAI’s capabilities to highly domain-specific, verticalized workflows, Menlo Ventures noted it was finding its way into healthcare, legal services, financial services, media and entertainment, logistics, biotech, AEC (architecture, engineering, and construction), home services, public sector, and education.

As for where GenAI was finding most use across businesses, Menlo Ventures found:
 

• Code Generation: 51%

• Support Chatbots: 31%

• Enterprise Search & Retrieval: 28%

• Data Extraction & Transformation: 27%

• Meeting Summarization: 25%

• Copywriting: 21%

• Image Generation: 20%

• Coaching: 13%

• Workflow Automation: 10%

• Web Research Automation: 9%

“Developers are pretty savvy — they know how to go back and forth between models fairly quickly,” said Tim Tully, a partner at Menlo Ventures in an interview with CNBC. “They’re choosing the model that fits their use case best... and that’s likely Claude 3.5.”

Yet, when it comes to market share, OpenAI continues to lead with a 34% share in 2024. However, this is a big dive from its number in 2023, which stood at 50%. In contrast, Anthropic enjoyed a 12% increase in usage, going from a 12% market share in 2023 to 24% in 2024.


On the other hand, a report by Linux Foundation Research, titled Shaping the Future of Generative AI found that nearly half of businesses prefer using open-source software rather than proprietary ones.

The report surveyed 316 AI professionals, where 84% of businesses note moderate to high adoption of GenAI, out of which 41% of that infrastructure is open-source.

Interestingly, 82% believe open-source GenAI will be crucial in shaping GenAI’s future.

The reason behind this high number is reduced costs, in terms of licensing and long-term dependence on proprietary vendors.

Furthermore, 52% of respondents feel that the transparency and trust in open-source software is a key reason for open-source software selection and will continue to be with increasing government regulation.

Is your business considering increasing its investment in AI and GenAI?

Do you think its investment will continue to rise in a similar fashion or do you think it will slow down in 2025? Do you think AI companies should focus on making more open-source software or do you think their proprietary software will be able to deliver?

Let us know in the comments below!