Finimize - 📈 Bain's big AI prediction

What’s going on here?

Consultancy firm Bain released a report on Wednesday predicting that the global AI market could reach $1 trillion by 2027.

What does this mean?

Tech firms are conjuring up data centers to train and run AI models like there’s no tomorrow. Meanwhile, software-as-a-service providers – think Microsoft 365, Salesforce, and Adobe – are in a race to cram as much of the super-smart technology into their products as possible. So even though it’s in the early stages, the market for AI-related services and hardware hit $185 billion last year. And in a new report out this week, consultancy firm Bain forecast that the market will expand by an average of 40% to 55% every year until 2027, potentially reaching $1 trillion.

Why should I care?

Zooming in: Bigger doesn’t always mean better.

Increasingly clever AI systems are driving the sector’s uptick – and as that intelligence grows, so does the need for bigger and better data centers. In fact, Bain believes the cost of those souped-up warehouses could jump from up to $4 billion today to an eye-watering $25 billion in five years, as their power capacity is set to expand rapidly to keep up. Those expensive projections will do little to alleviate investors’ concerns: they’re already worried that tech firms are spending too much on AI infrastructure for what they’re getting out of it.

For markets: When opportunity knocks…

Besides straightforward Big Tech plays, investors have found alternative ways to get in on the AI action. One is copper: already in high demand for its role in many green industries, the metal is needed to build, power, and cool data centers. So much so that mining giant BHP expects data centers to account for up to 7% of total copper demand by 2050, up from under 1% today. Another is utilities: data centers’ energy usage is predicted to double by 2026 from 2022’s levels, which would charge up the bottom lines of utility companies.

What’s going on here?

Design platform Canva is sketching up an initial public offering (IPO), aiming to steal some attention from creative software rival Adobe.

What does this mean?

Canva’s nursing a humble $26 billion valuation these days – a hefty downgrade from the $40 billion it boasted in 2021. But if the Australian company pulls off a successful IPO, the resulting cash could fund shiny new products and more purchases of other firms – bets that could restore its former glory. And if Canva lists in the States, as hinted, that would set the scene for a face-off with American rival Adobe. The $230 billion behemoth boasts a 70% share of the creative software market, putting Canva’s 4% to shame.

Why should I care?

For markets: A freemium listing.

Canva’s free tools have won over an impressive 190 million monthly users, double its count from 2022. And the company’s sales picked up by 50% last year, too – although most of Canva’s cash still comes from individual subscriptions, rather than more lucrative deals with businesses. So to score a bigger chunk of the market, Canva’s betting big on AI. The company snagged generative AI startup Leonardo.ai in July – mere months after picking up Affinity, a rival to Adobe’s Photoshop and Illustrator software.

The bigger picture: It’s safer stateside.

The US market is the go-to spot for international company listings. In Europe, the Middle East, and Africa, IPO proceeds were down 39% last year, while the Americas saw an uptick of 155% with around 132 deals on US exchanges. You can see why they call it the land of opportunity. A US listing comes with benefits that some foreign markets just can’t offer – not least a bigger, richer pool of potential shareholders who can help firms fetch higher valuations than they’d get elsewhere.