AI-powered ad tools are rapidly gaining market share.
Meta CEO Mark Zuckerberg memorably declared last year that its automated ad tools had become so powerful that brands could simply connect a bank account, set their campaign objectives, and let its artificial intelligence take over. New data suggests a growing number of advertisers are doing just that.
A report released this month by the Madison and Wall consulting and advisory firm estimated that AI-powered advertising revenue in the US will grow 63% to reach $57 billion in 2026, accounting for 12% of total advertising spending.
Madison and Wall said the 88% of advertising that doesn’t rely on AI-powered tools will grow by 5% in the same period.
“We think it’s a new dimension” of advertising growth, said Luke Stillman, managing director at Madison and Wall.
The firm defines AI-powered advertising as spend that flows through platforms where AI controls targeting, bidding, budget allocation, and campaign optimization with minimal human intervention.
The two biggest tools of this kind are Google’s Performance Max and Meta’s Advantage+, though many other platforms, from Amazon to TikTok, offer similar AI-powered advertising products. Search and social media are the dominant channels for AI-powered ads, Madison and Wall said.
Tech companies often cite these tools as a way for advertisers to speed up the time it takes to create and deliver ad campaigns, though some advertisers are wary about handing over the reins entirely to black box systems. Generative AI ad tools, in particular, can occasionally go rogue and produce bizarre ads if not closely monitored.
Stillman said that while use of AI-powered ad tools leans slightly more toward small advertisers, the spending figures are now so large that it’s clear big brands are adopting the tech as well.
“Every advertiser is going to say, ‘We really value control, and we want transparency to understand where every one of our dollars is spent,'” Stillman said.
That said, when Madison and Wall looked at where companies are deploying their budgets, the firm saw “little evidence that they are not willing to trade transparency and control in return for price and performance.”
If AI-powered tools help an advertiser hit their return on ad spend targets, “transparency is a nice-to-have, not a must-have,” Stillman said.
Madison and Wall estimated that AI-powered ad budgets will grow at a compound annual rate of around 29% through 2030.
Generative AI couldn’t have come along at a better time for Target.
That’s the assessment Target’s tech chief, Prat Vemana, told Business Insider after newly minted CEO Michael Fiddelke spent the morning laying out an ambitious turnaround strategy at the retailer’s Minneapolis headquarters.
The company had just reported its 13th consecutive quarter of weak sales — a stretch that saw big box competitors like Walmart and Costco gain market share — and leaders from across the organization were assembled to make the case that it was a new day at Target.
“I couldn’t have asked for a better time for AI to show up, because now we have a need. We have a bold agenda ahead of us,” Vemana said.
Target CEO Michael Fiddelke, who officially started in his new role in February, speaks at the retailer’s 2026 financial community meeting.
Dominick Reuter/Business Insider
By the numbers for the coming year alone, Target’s agenda is indeed bold: $1 billion in additional capital investments, $1 billion more in new operational commitments, 30 new stores, 130 remodels, overhauls to as much as 75% of the assortment in certain categories, and blisteringly fast product releases.
Fiddelke said the work is already paying off with an acceleration in February sales, and the company expects to report sales growth in every quarter of 2026.
Underpinning the success or failure of nearly every aspect of that strategy are a host of AI-powered tools developed by Vemana’s teams.
“Tech is a through-line in everything that we do,” Vemana said.
Target has a long tech legacy, but the competition is as fierce as ever
Target has long based marketing and operational decisions on vast troves of data, and it was an early mover in applying machine learning to its business.
The company’s predictive analytics department even became the subject of controversy in 2012 when it was revealed that buyer behavior could be used to infer something about a shopper so intimate as a pregnancy. (Whether or not it actually did is unclear.)
A decade-plus later, that almost seems quaint in the age of Meta AI glasses, Ring doorbells, and hackable robot vacuums. Indeed, an entire industry now generates astronomical revenues by anticipating users’ tiniest impulses.
Target has long used machine learning in its business, but now its rival are too.
Dominick Reuter/Business Insider
And in just the last few years, generative AI technologies started running laps around what their ML predecessors could do. Meanwhile giants like Amazon and Walmart are reaping the advantages that come with scale.
In other words, the competition caught up, and machine learning that was once such an advantage for Target is arguably less of a leg up in the hyper-paced world of AI.
But as companies around the world cite AI in trimming their tech workforces, Vemana said he needs his teams in the US and India to match the output of an even larger company.
“Generative AI actually opened up a completely other dimension of growth,” he said.
Target is investing in tools to help teams save time — and predict trends
For Target’s apparel teams, a new Trend Brain platform combines visual analysis of fashion photos with social media sentiment analysis in an effort to predict what styles will take off in the next season.
That lets designers pull a new designs together in a matter of weeks rather than months, positioning Target to rotate through collections nearly twice as fast as before, said Gena Fox, Target’s head of apparel.
It also gives the company an early alert for products that might not sell as strongly.
“We saw really early that polka dots were trending,” she added, referring to a line of swimsuits. “So we were actually able to go back and buy into that more and then move out of styles that weren’t performing as well.”
Target’s “Western Edit” series was designed using the Trend Brain platform.
Dominick Reuter/Business Insider
Trend Brain offers another advantage when it comes to handling the endless details of designing a fashion campaign.
“After a few hours of this, you’re going to skip a few things, right?” Vemana said. “AI doesn’t get tired.”
And as that product arrives in stores, managers and associates now have a new suite of Target-designed tools on their handheld Zebra scanners that simplify everything from planning displays, to prioritizing restocking tasks, to getting immediate support without having to go find a desktop computer and fill out forms.
“We really care about human touch — that’s what matters,” Vemana said. “Anything that gives time back to the team, they give back to the guest, and guest is happy.”
Meeting customers where and how they shop
Agentic shopping grabbed headlines last fall, and Target is among the first retailers to offer multi-item baskets through ChatGPT. It’s also one of Google’s partners in developing the open commerce protocol on Gemini.
But beyond those more obvious applications, Vemana said AI is helping the Target team deliver improvements to how customers shop with its app.
For starters, the executive said the way generative AI handles information required a complete overhaul of the app’s code base — a task that AI coding companions made much faster.
Target’s app is increasingly packed with AI features.
Dominick Reuter/Business Insider
“We’ve rewritten the entire app already — what would have taken years and years — in, like, 18 months,” he said.
And with a third of in-store shoppers using the app during their visits, the changes aren’t just for chatbots.
The app itself now has several customer-friendly features, like shopping list scanner tool that converts handwritten notes into a shoppable list, to a store mode that pins list items on a map of an actual location.
Target didn’t break out the full size of its AI investment, and a big question for companies implementing AI is whether the capital required to deploy it will generate a positive return on investment.
Vemana emphasized that Target views the tech as essential for its growth plan.
“It’s not just doing AI for the sake of doing AI,” he said. “We are foundationally strengthening so that we have the right kind of AI applied in the right places.”
This interview is based on a conversation with Lyle Wallace, 45, a Dallas pastor. It has been edited for length and clarity.
I hit 6 feet 3 inches tall as a freshman in high school and weighed around 185 pounds.
Then, while playing a lot of sports like football and basketball during my junior and senior years, I ate a lot of protein and built a ton of muscle, eventually reaching 230 pounds.
It was all good because I was running around doing all sorts of exercise, and my metabolism was fast. That all changed when I started Bible college in upstate New York, and my physical health became less of a priority.
My job was stressful, and I found it hard to detach
The weight crept on. Then, when I entered the ministry, I found myself eating out a lot with the young members of the congregation. Sitting at a table together was a good way to bond and establish trust.
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The only trouble was that we went to fast food places like Taco Bell or Mexican restaurants, where you fill up on chips and salsa before the main course arrives.
The job was stressful because I found it difficult to detach from other people’s emotions as they dealt with bad stuff like domestic violence and sexual abuse.
Wallace weighed over 285 pounds at his heaviest
Courtesy of Lyle Wallace
I turned to food as an outlet and became less healthy by the month. I had terrible digestive issues and bouts of diverticulitis. I had several colonoscopies and liver biopsies in my 20s and 30s and was found to have a fatty liver.
They should have been warning signs, but I ignored them and stayed sedentary. I’d sit in my office studying, writing sermons, and doing paperwork. My metabolism slowed down as I got older, but I didn’t change my habits.
I had problems with tendonitis, with symptoms mimicking a heart attack, pressure on my joints, and suffered excruciating pain from a bad back. I had spine surgery in 2019.
I was prescribed Metformin
My wife, Nicole, would be on top of me about the causes, but I didn’t face facts. It was only when I was diagnosed with diabetes in January 2023 that I became seriously worried.
My dad was diabetic and needed three or four insulin shots a day. I’m terrified of needles and didn’t want to go down the same route. The scale registered over 285 pounds.
I was prescribed Metformin, but not given any advice about improving my lifestyle. My blood sugar levels actually increased — one of my A1C tests showed 8.0 — and I despaired.
Still, it was a wake-up call. My health insurance company encouraged me to sign up for an app called Twin Health, which created an AI-powered “digital twin” of my metabolism.
Wallace at his current weight of 215 pounds after reversing his diabetes.
Courtesy of Lyle Wallace
It collected my health information, including data from lab tests, a smart scale, a blood pressure cuff, and real-time glucose monitor sensors, and made personalized recommendations for nutrition, sleep, and exercise.
The app advised me what to eat and when. I learned that consuming protein and fiber on my plate before any carbohydrates helped my metabolism. Nicole and I scanned barcodes at the supermarket to assess the suitability of certain foods and prevent sugar spikes.
I’ve reversed my diabetes
I increased my physical activity by building up to walking four miles a day, without causing back pain. The other day, I ran after my 8-year-old daughter and her cousin and overtook them. They couldn’t believe it.
My current weight is 215 pounds, 70 pounds lighter than before. I’ve gone from a 42-inch to a 36-inch waist and lost 2.5 inches off my collar size.
Best of all, I’ve reversed my diabetes — reducing my A1C to 5.1 —and am medication-free. People in my congregation keep asking how I did it. I’m not a particularly high-tech guy, but AI worked wonders for me.
