Artificial Intelligence (AI) Applications for Smart Cities Market to Reach $38.35 Bn by 2030, Growing at a 19.4% CAGR
The Business Research Company
The Business Research Company’s Artificial Intelligence (AI) Applications for Smart Cities Global Market Report 2026 - Market Size, Trends, And Forecast to 2035
LONDON, GREATER LONDON, UNITED KINGDOM, January 30, 2026 /EINPresswire.com/ -- The integration of artificial intelligence (AI) into urban development is transforming how cities operate, making them smarter, more efficient, and sustainable. The market for AI applications in smart cities is expanding rapidly as urban areas seek innovative solutions to manage infrastructure, enhance public services, and improve residents’ quality of life. Let’s explore the current market size, key growth drivers, regional insights, and emerging trends shaping this evolving industry.
Current Market Size and Projected Growth of the AI Applications for Smart Cities Market
The market for artificial intelligence applications in smart cities has experienced significant expansion in recent years. It is projected to grow from $15.78 billion in 2025 to $18.88 billion in 2026, representing a strong compound annual growth rate (CAGR) of 19.6%. This historic growth is largely driven by factors such as increasing urbanization, rising demand for efficient city management, the need to optimize traffic flow, expanded public safety programs, and a broader adoption of Internet of Things (IoT) infrastructure.
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Looking ahead, the market is expected to continue its rapid ascent, reaching $38.35 billion by 2030 with a CAGR of 19.4%. This anticipated growth is fueled by rising investments in smart city projects, increased government funding for AI deployment, deeper integration of AI technologies in urban services, the expansion of cloud and edge computing applications in city environments, and a growing emphasis on sustainable urban development. Key trends shaping the future include improvements in AI algorithms, breakthroughs in real-time data analytics, advances in autonomous traffic control, innovations in predictive maintenance, and tighter integration of AI with IoT and sensor networks.
Understanding Artificial Intelligence Applications in the Smart Cities Sector
AI applications in smart cities involve using advanced technologies such as machine learning, automation, and data analytics to improve urban infrastructure and public services. These solutions enable cities to optimize operations like traffic management, energy use, and public safety, ultimately making urban environments more responsive and sustainable for residents. By harnessing AI, cities can better allocate resources, reduce waste, and create more livable spaces.
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Primary Factors Encouraging Growth of AI Applications in Smart Cities
One of the main drivers behind the growth of AI applications in smart cities is the increasing adoption of smart-city initiatives worldwide. These initiatives focus on using digital tools and data analytics to optimize city functions and stimulate economic growth. More municipalities are implementing intelligent transportation systems to ease congestion and enhance mobility, which relies heavily on AI algorithms to manage traffic flow, energy grids, and waste disposal efficiently.
For instance, according to the European Commission, the number of climate-neutral and smart cities recognized under the EU Mission Label has grown substantially. Starting with 10 cities in October 2023, the number increased to 23 in March 2024, 20 more in October 2024, and 39 additional cities in May 2025, totaling 103 out of 112 participating cities. This expansion illustrates the widespread commitment to smart city development, which is a key catalyst for the AI applications market’s growth.
Regions Driving the AI Applications for Smart Cities Market
In 2025, North America held the largest share of the AI applications for smart cities market. However, Asia-Pacific is expected to emerge as the fastest-growing region during the forecast period. The market analysis encompasses a broad range of regions including Asia-Pacific, South East Asia, Western Europe, Eastern Europe, North America, South America, the Middle East, and Africa, highlighting the global scale and diversity of smart city adoption.
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