AI in Smart Cities Market Size to Hit USD 460.47 Bn by 2034

AI in Smart Cities Market Size and Forecast 2025 to 2034

The global AI in smart cities market size accounted for USD 39.62 billion in 2024 and is predicted to increase from USD 50.63 billion in 2025 to approximately USD 460.47 billion by 2034, expanding at a CAGR of 27.80% from 2025 to 2034. The demand for sustainable and efficient urban solutions drives the market. The surge in improving the quality of city life and regulatory compliance is driving the implementation of artificial intelligence in smart city services. 

AI in Smart Cities Market Key Takeaways

• North America dominated the global AI in Smart Cities market with the largest share in 2024.
• Asia Pacific is estimated to grow at the fastest CAGR in the market between 2025 and 2034.
• By technology, the machine learning segment captured the largest market share in 2024.
• By technology, the computer vision segment is anticipated to show the fastest growth during the predicted timeframe.
• By application, the traffic management segment accounted for the largest market share in 2024.
• By application, the infrastructure management segment is anticipated to witness the fastest growth over the forecast period.
• By deployment mode, the cloud-based segment led the market in 2024.
• By deployment mode, the on-premises segment is anticipated to grow at a remarkable CAGR between 2025 and 2034.

Market Overview

Artificial Intelligence in Smart Cities is taking a significant jump toward improvement and efficiency in city management services. The trend of smart cities includes concern over smart mobility management, smart public safety, smart education, smart healthcare, and smart government services. Artificial intelligence is being implemented with existing solutions of smart cities to enhance the efficiency of services and solutions, such as city-wide traffic management, utility management, and water management. Moreover, rapid urbanization is driving the need for the AI in Smart Cities market to improve the quality of urban life and reduce environmental impact, to create smart and sustainable cities.

Urban governance has shifted to AI-powered solutions to solve city problems and issues. The ethical and privacy issues and lack of regulatory standardization for artificial intelligence can hinder their implementation in existing deployments of smart cities. However, rising government support and investments in the development of innovative technology with artificial intelligence integration are likely to overcome data security and regulatory compliance challenges.

AI in Smart Cities Market Growth Factors

• Rapid urbanization: The AI in Smart Cities market has witnessed spectacular growth, driven by rapid organization drives demand for efficient city management solutions to enhance urban services like traffic control, energy management, and utility management.
• Sustainability concerns: rising concerns for environmental impacts and sustainability, increasing demand for artificial intelligence in existing solutions to manage energy consumption, and the reduction of waste and environmental impact.
• Safety concerns: Rapid urbanization and consumption of resources have drawn concern over the safety of the public. The government is implementing artificial intelligence in the surveillance system to enhance public safety and security.
• Adoption of IoT devices: The rising adoption of IoT devices in existing city services to collect, store, and analyze the maximum amount of data, fueling market expansion.
• Government initiatives: The government claims to show named investments in digital infrastructure and promote the adoption of AI in Smart Cities to improve management and infrastructure services.

Market Scope

Market Dynamics

Drivers

Focus on efficient and sustainable urban management

Urban cities are facing major issues like pollution, traffic, and environmental impact. The rising shift toward sustainability and technological advancements is enabling the adoption of cutting-edge technology like AI to be implemented in urban management systems. Rapid population growth and increased consumption of resources drive the need for efficient and advanced solutions to enhance urban facilities. The AI in Smart Cities market plays a vital role in improving the efficiency and maintaining the sustainability of urban cities. Artificial intelligence in urbanization is transformative and steep toward enhancing decision-making and policymaking to map and identify energy and infrastructure needs for communities in developing regions.

• In November 2024, IBM and Sustainable Energy for All announced publicly available artificial intelligence-powered solutions to inform more sustainable urban development for cities and communities around the world at the 29th United Nations Climate Change Conference of the Parties.

Restraint

Ethical consideration

Ethical considerations regarding data privacy, security, bias, transparency, and accountability are other major restraints of the adoption of the AI in Smart Cities market. Artificial intelligence collects and stores sensitive data, creating a high risk of cyber threats. Ensuring protection of citizens’ private data, potential bias, and artificial intelligence decision making, and transparency into the decision-making process is essential. Implementation of an ethical framework ensuring regulatory compliance can overcome the restraint.

Opportunity

Digital government services

The government is focusing on enhancing public safety and improving smart city initiatives. The growing adoption of digitalization in government services is transforming smart city developments. AI-enabled digital government services helps to improve AI enabled digital government services help to improve efficiency and effectiveness in public services, including education, transportation, and healthcare. A growing emphasis of the government on adapting AI-powered chat boards and virtual assistants to enhance citizen engagement and provide quick and accurate personalized support, contributing to fueling AI in Smart Cities.

• In January 2024, an MoU to create and promote an AI Cluster using IBM Watson was signed by BM and the Department of Science and Technology, Government of Gujarat. The partnership aims to offer financial institutions digital assistant solutions, an AI sandbox, help with proof-of-concept creation, and AI literacy initiatives.

Technology Insights

The machine learning segment captured the largest AI in Smart Cities market share in 2024. Machine learning is enhancing various smart city aspects, including utility use, citizen engagement, waste management, public safety, and traffic management. Machine learning enables leading from data, enhances understanding, and enables automated tasks to improve the efficiency and sustainability of urban cities. Optimization and pattern recognition enable improvement in applications and the ability to make data-driven decisions.

On the other hand, the computer vision segment is anticipated to show the fastest growth during the predicted timeframe. The adoption of computer vision technology has increased to improve efficiency, safety, and resource management through its real-time visual data analysis and interpretation. Various aspects, including surveillance and security, traffic management, smart infrastructure development, and data analysis, are being integration with computer vision technology to improve maintenance, safety, and efficiency.

Application Insights

The traffic management segment accounted for the largest AI in Smart Cities market share in 2024. The adoption of AI has increased to enhance the transportation system within urban settings. Rapid urbanization has increased issues of traffic management, leading to a shift in the adoption of artificial intelligence. AI-enabled technologies provide real-time data analysis and quick decision-making to improve management services. Artificial intelligence optimizes, reduces time, and improves driver experience, contributing to advanced traffic management services.

The infrastructure management segment is anticipated to witness the fastest growth over the forecast period, driven by the rising adoption of artificial intelligence to enhance infrastructure management services. Artificial intelligence in cities helps infrastructure management with more efficiency by reducing waste and improving resource allocation. Areas with data connectivity, sensors, and robust IT systems enable artificial intelligence to provide predictive maintenance, process optimization, and data-driven decision-making to create smart infrastructure.

Deployment Mode Insights

The cloud-based segment led the AI in Smart Cities market in 2024, driven by the rapid use of cloud-based deployments. Smart cities are adopting cloud-based deployments to enhance scalability, integration, data management, and cost-effectiveness. Cloud-based resolutions enhanced scalability by providing accurate needs without infrastructure investments. The solutions improve integration and data management capacity by improving decision-making ability and functionality. The radius of infrastructure cost makes cloud-based deployments an attractive option for smart cities.

The on-premises segment is anticipated to grow at a remarkable CAGR between 2025 and 2034 due to high concern for public security and safety. On-premises deployment offers data security, customization, reliability, and integration with existing infrastructure and systems. On-premises is mainly adapted in smart infrastructure management, intelligent transportation systems, and public safety and surveillance services.

Regional Insights

Focus on Infrastructure Developments in North America

North America dominated the global AI in Smart Cities market in 2024. North America is the early adopter for cutting-edge technologies, including artificial intelligence. Rising government initiatives and investments in infrastructure developments in urban areas are driving the adoption of artificial intelligence to integrate with existing systems. Well-established industries like healthcare, service, and public transport are implementing artificial intelligence with their existing applications to enhance efficiency and reduce time, cost, and environmental impacts. The demand for sustainable infrastructure management is leading to innovation and the development of artificial intelligence for smart cities.

Investments in Technology and Innovation Drive the U.S.

The U.S. is leading the market in the region mainly due to the countries’ active governments and their heavy investments in technology and innovation. The U.S. is the global home for technological innovations. The presence of key market vendors, investments in smart city initiatives, and research and development are driving artificial intelligence implementation in smart cities.

• In January 2025, OpenAI launched ChatGPT Gov, a tailored AI model for U.S. government agencies, allowing custom GPTs that employees can build and share within their government workspace. The model operates securely within Microsoft Azure and includes features from ChatGPT Enterprise, focusing on responsible AI usage.

Rapid Urbanization in Asian Smart Cities

Asia Pacific is estimated to grow at the fastest CAGR in the AI in Smart Cities market between 2025 and 2034. Asia Pacific experiences rapid growth of urban population, driving the need for sophisticated urban management solutions. The surge for efficiency and sustainable solutions powered by artificial intelligence has taken place in Asian cities. Asian governments are promoting smart city projects to improve city management and public services.  The government is providing extensive investments in smart transportation, energy management, and public safety systems.

• In April 2025, Blaize Holdings, Inc., a provider of purpose-built, artificial intelligence (AI)-enabled edge computing solutions, announced it had been selected by the Chungbuk Institute of Science and Technology (CBIST) to develop the region’s Digital Innovation Hub, expanding AI-powered smart city solutions across Chungcheongbuk-do, South Korea.

China’s Urban Development Strategies Promoting Vital Growth

China is the major player in Asia, driving the adoption of artificial intelligence-powered solutions in smart cities, driven by significant investments in comprehensive urban development projects. China is becoming a hub for smart city technologies.  With rapid urbanization, infrastructure developments, and government support in urban strategies, China is anticipated to lead the market in the upcoming period.

European Sustainability Trend Fuelling Artificial Intelligence Adoption

Europe is considered to be a notably growing AI in Smart Cities market in the upcoming period. The European Union has witnessed rapid demand for AI in various city sectors, including transportation, energy management, and public services. Government and private bodies are investing heavily in artificial intelligence research and development, ensuring the availability of innovative solutions for smart cities. The existence of stringent government policies and regulatory standards for AI development enhances the ethical use of smart cities. The surge in sustainability is promoting the adoption of artificial intelligence solutions in European cities.

UK’s Smart City Initiatives Contribute to Market Growth

The UK is leading in smart city initiatives, driving demand for innovative solutions in the energy management and transportation sectors. Projects like congestion charging and low-carbon transportation programs are driving a shift toward the adoption of artificial intelligence in smart city solutions. The UK has increased the implementation of artificial intelligence for public safety, sustainable infrastructure, and smart mobility management services.

AI in Smart Cities Market Companies

• IBM Corporation
• Huawei Technologies Co., Ltd.
• Intel Corporation
• Google 
• Microsoft Corporation
• Cisco Systems, Inc.
• Siemens AG
• Oracle Corporation
• SAP SE
• Schneider Electric
• General Electric (GE)

Recent Developments

• In April 2025, Iveda, a global contributor in artificial intelligence (AI)-driven video surveillance and smart city solutions, launched IvedaAI, an enhanced AI video analytics platform designed to overcome challenges in large-scale deployments with automated camera discovery, seamless scene configuration, and improved compute efficiency.
• In April 2025, Huawei launched five aviation solutions, including the Smart Airport Intelligent Operation Center (IOC), to advance intelligent industry upgrades during the Passenger Terminal Expo 2025.
• In March 2025, INFINITIX, a leading one-stop platform provider specializing in GPU resource scheduling and AI development management, announced participation in the Kaohsiung Smart City Summit & Expo from March 20 to 22, 2025, to present the theme “Driving the Smart Ecosystem: AI Full Lifecycle Management,” offering enterprises fast and effective AI deployment solutions. 

Segment Covered in the Report

By Application

• Traffic Management
• Public Safety and Security
• Energy Management
• Infrastructure Management
• Environmental Monitoring
• Smart Governance

By Technology

By Deployment Mode

By Region

• North America
• Asia Pacific
• Europe
• South America
• Middle East and Africa