Intelligence Report: Which Industries Are Investing the Most in AI?

Artificial intelligence (AI) is proliferating across the economy, with applications ranging from hospital diagnostics to internet queries. The emergence of AI in so many areas raises the questions: Which industries spend the most on AI, and has that list changed as AI tools have become more widely available? In a recent Monthly Labor Review article, Bureau of Labor Statistics (BLS) economists tracked trends in aggregate business AI usage through software investment. In this week's post, we use underlying industry-level estimates from the Bureau of Economic Analysis (BEA) to see which industries are leading in software investment in recent years.

The scale of the AI shift is hard to measure directly, but investment data may offer some insights. At its core, AI is software, and while firms don't report AI spending as a line item, the BEA tracks software investment across industries as part of its capital stock data. The BEA also provides more detailed industry-level estimates, although they are considered less reliable than the higher-level aggregates. As a result, the findings we present below should be taken as preliminary estimates rather than an authoritative account.

In official government data, software investment is broken down into three main categories due to differences in how businesses record their expenditures in each category:

• Prepackaged software is software that can be purchased as is from other businesses, like the latest Windows operating system.
• Custom software is software that can be purchased like prepackaged software but further customized to meet the needs of the business.
• Own-account software is developed internally by a business rather than being purchased from elsewhere.

Accurately recording business expenses in each category can be challenging. For example, while prices and quantities of prepackaged software can be easy to measure, prices and quantities of own-account software are often not measured, and related expenditures have to be imputed from other data such as compensation costs for software programmers and systems analysts.

Using the BEA's industry-level estimates, we examine real software investment across 43 private nonresidential industries from 2019 to 2024. As shown in Figure 1, software investment rose steadily across all industries, with the sharpest one-year increase coming between 2021 and 2022, coinciding with the first public release of a generative AI model. Also, investment in all three software categories grew.

At the industry level, information and data processing services saw some of the fastest growth in our sample. Occupations in this sector include computer programmers, computer support specialists, computer systems analysts and software developers. As seen in Figure 2, prepackaged software — the category most likely to capture AI tools and cloud-based services — rose roughly 76 percent from 2019 to 2024, and custom software added the most in dollar terms. Both categories grew to well above their prepandemic levels.

However, not all sectors have taken the plunge into the software wave. Oil and gas extraction, for example, had the slowest growth in software investment over our sample period, as seen in Figure 3. Software investment fell sharply from 2019 to 2021 and has only partially recovered since. By 2024, total software spending in the sector remained below where it started, with prepackaged software accounting for the largest share throughout.

The tables below show the top and bottom 10 industries by software investment growth rate from 2019 to 2024 and the top 10 by 2024 software investment level. The aforementioned information and data processing services sector ranks among the fastest-growing industries and was the largest spender in 2024. The fastest-growing list skews toward knowledge-intensive service industries, while the slowest-growing sectors are concentrated in goods-producing and extractive sectors like oil and gas, petroleum, and primary metals. Hospitals also rank among the top spenders in 2024, consistent with the broader narrative around AI adoption in health care.

The steady growth in software investment across industries since 2019 (and sharp acceleration around 2022) suggests that, rather than AI adoption being a phenomenon solely confined to the tech sector, it may be a broad-based shift in how businesses invest.

Views expressed in this article are those of the author and not necessarily those of the Federal Reserve Bank of Richmond or the Federal Reserve System.