Business spending on AI surged 500% this year to $13.8 billion, says Menlo Ventures

Business spending on generative AI surged 500% this year, from $2.3 billion in 2023 to $13.8 billion, according to data released by Menlo Ventures on Wednesday.

The report also found that OpenAI ceded market share in enterprise AI, declining from 50% to 34%. Anthropic doubled its market share from 12% to 24%. The results came from a survey of 600 enterprise IT decision-makers from companies with 50 or more employees, per the report.

Menlo is an investor in Anthropic. OpenAI did not immediately respond to a request for comment.

Tim Tully, a partner at Menlo Ventures, told CNBC in an interview that the power shift is thanks in part to the advancement of Claude 3.5 and because the majority of companies are using three or more large AI models. Although OpenAI and Anthropic dominated companies’ AI model use, he said, people are “juggling models” and that habit is “not a well-understood piece of data.”

“Developers are pretty savvy — they know how to go back and forth between models fairly quickly,” Tully explained. “They’re choosing the model that fits their use case best… and that’s likely Claude 3.5.”

Meta‘s market share stayed at 16% and Cohere‘s share remained at 3%. Google’s rose from 7% to 12%, and Mistral’s lost one percentage point, declining to 5% in 2024.

Foundation models — such as OpenAI’s ChatGPT, Google’s Gemini, Anthropic’s Claude and others — still dominated enterprise spend, the report found, with large language models receiving $6.5 billion in enterprise investment.

Menlo’s report was bullish on AI agents, a leading AI trend and area of investment in 2024. Google, Microsoft, Amazon, OpenAI and Anthropic are pursuing the technology. AI agents are viewed as a step beyond chatbots. They can perform multistep, complex tasks on a user’s behalf, and generate their own to-do lists, so that users don’t have to walk them through the process step-by-step.

“The agent stuff is real — it’s not hype,” Tully told CNBC. “I don’t think it’s going to cure cancer, necessarily, but is it going to make people more productive and help companies generate revenue? Yes.”

The report found code generation is the leading use case for generative AI, with more than half of survey responses naming that as a dominant use. Support chatbots came next, at 31%, followed by enterprise search and retrieval, data extraction and transformation, and meeting summarization.