Indian tech vendors can take heart from Moody's AI crystal ball

New Delhi: Global enterprise spending on generative artificial intelligence (AI) is likely to cross $150 billion by 2027, financial services firm Moody’s said in an outlook that will potentially brighten business prospects for India’s software exporters.

In a note to investors on Monday, Moody’s said that despite challenges that include availability of quality data and cyber security, enterprise adoption of generative AI will grow, as the fundamental technologies develop. Global spending on AI is estimated to cross $500 billion in the next three years, of which generative AI is slated to account for nearly 30%. The US-based rating agency projected generative AI spending and implementation to increase through the next three years, starting this year itself.

“Rapid innovation in AI technologies will continue in 2024, drawing more users and fostering a vibrant network of hardware suppliers, model providers, and application developers. We do not foresee AI significantly affecting credit quality in the next 12 months, but as use cases gradually broaden across industries, many issuers will start feeling the effects over the next two to three years," Moody’s said in the note, a copy of which was seen by Mint.

The projections could spell boon for the $245-billion domestic IT services industry, which is currently in the middle of one of its worst financial years in recent memory. Even as overall tech spending by enterprises across various industries continues to be weak, each of India’s top IT services firms have spoken about building capability and training their employees on generative AI in anticipation of growing demand for this novel technology. While most projects on generative AI for India’s IT services firms have been early-stage proof-of-concept projects, the December-quarter earnings saw some green shoots. K. Krithivasan, chief executive of Tata Consultancy Services, India’s largest IT service provider by revenue, said in an earnings call that four generative AI projects had evolved from proof-of-concept to implementation.

C. Vijayakumar, chief executive of HCL Technologies, also said in the company’s post-earnings press conference that it is realizing generative AI deals. “However, most such deals are still quite small in quantum, at sub-$1 million," he said.

Moody’s also identified banking and insurance, as well as manufacturing, as sectors where generative AI deployment will accelerate faster than others. “Sectors with sizeable staff costs and large datasets will benefit the most," it said. However, the rating agency expects generative AI adoption to pick up faster beyond 2026, failing which the credit rating of enterprises among businesses could start getting affected.

“While the AI industry is growing fast among tech companies, progress among non-tech firms will be gradual. Most issuers will not see much change in their credit quality before 2026. Firms need time to identify use cases, build expertise, test new technologies, and grapple with evolving regulations.," the note mentioned.

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ABOUT THE AUTHOR

Shouvik Das
Shouvik Das is a science, space and technology reporter for Mint and TechCircle. In his previous stints, he worked at publications such as CNN-News18 and Outlook Business. He has also reported on consumer technology and the automobile sector.
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Published: 23 Jan 2024, 10:16 PM IST