Menlo Ventures survey reveals where enterprises are spending on AI

Current state of enterprise AI adoption: A comprehensive survey by Menlo Ventures reveals a complex landscape where substantial investment coexists with strategic uncertainty.

• More than one-third of surveyed IT decision-makers lack a clear vision for implementing generative AI across their organizations
• Enterprise spending on AI infrastructure and applications increased more than six-fold from $2.3 billion in 2023
• 72% of decision-makers expect broader adoption of generative AI tools in the near future

Investment breakdown and priorities: Foundation models represent the largest segment of enterprise AI spending, while application development shows the most dramatic growth.

• Foundation model investments reached $6.8 billion, up from $1 billion in 2023
• AI applications spending surged eight-fold to $4.6 billion
• Data and infrastructure investments remained relatively modest at $400 million
• Code generation tools, particularly Microsoft’s GitHub Copilot, lead application use cases, followed by support chatbots and enterprise search

Market dynamics and vendor landscape: The competitive landscape for AI providers is shifting as enterprises evaluate different solutions.

• OpenAI’s enterprise market share declined from 50% to 34% among closed-source models
• Anthropic doubled its enterprise presence from 12% to 24% as companies switched to Claude 3.5 Sonnet
• A “Modern AI Stack” is emerging, incorporating foundation models, data services, development frameworks, and integration tools

Future outlook and challenges: The AI landscape is poised for significant disruption across multiple sectors.

• AI agents are expected to impact the $400 billion enterprise software market
• Traditional software companies and IT outsourcing firms face competition from AI-native challengers
• A significant talent shortage looms, with AI-skilled enterprise architects potentially commanding 2-3x salary premiums

Strategic implications: While enterprise AI adoption is accelerating rapidly, the gap between investment and strategic clarity suggests organizations need to focus on developing comprehensive implementation roadmaps while preparing for significant industry transformation.