Retailers are turning to AI to streamline supply chains and customer experience – and open source options are proving highly popular

AI in retail is booming, with the vast majority of organizations planning to increase their AI budgets this year, according to new research from Nvidia.

The chip giant’s third annual State of AI in Retail and Consumer Packaged Goods report found 91% of respondents are either actively using or assessing AI. Nine-in-ten said they’d build on the success of current projects by increasing their AI budgets in 2026.

Of those using AI, 89% said it was helping to increase annual revenue, while 95% said it is acting to cut costs. More than half said they'd seen improved employee productivity and operational efficiencies and 41% reported improved customer service.

“What executives should be focused on is not green-lighting vanity projects at the expense of high-ROI wins,” said Chris Walton, co-CEO of Omni Talk. “The retailers who will succeed will start with boring use cases that solve specific P&L problems, prove the value, then scale.”

Open source AI is extremely popular, the study found, with 79% saying these models and software were moderately to extremely important to their AI strategy.

“Most retailers first started experimenting with AI using proprietary AI vendors. They had the models, but they didn’t own the keys to their own kingdom,” said Jason Goldberg, chief commerce strategy officer of Publicis Groupe.

“Open source flips that script, allowing retailers to leverage their proprietary data, avoid vendor lock-in and benefit from open-source community innovation.”

Similarly, agentic AI is an increasing focus, with 47% of respondents saying that their companies were either using or assessing agentic AI in their operations. One-in-five said AI agents were already active in their organizations, with another 21% reporting that agents are coming within the next year.

“The truly disruptive impact of agentic AI will hit retail supply chains and operations first, such as autonomous agents handling real-time inventory rebalancing, dynamic pricing and vendor negotiations at scale, because that’s where the ROI is measurable,” said Walton.

Retailers tackle supply chain issues with AI

AI is also helping organizations deal with supply chain problems, allowing retailers to optimize inventory at the store and customer level rather than at a regional level.

They can now incorporate many more factors in their demand forecasts, and more accurately match supply to demand.

The top pressure valve, Nvidia noted, is using AI for supply chain operational efficiency and throughput, cited by 51% of respondents. Meeting customer expectations was next on the list at 45%, and solving for traceability and transparency was third at 38%.

Physical AI is gaining ground in the industry, meanwhile, with 17% of respondents using or evaluating the technology.

“The real transformation will come from AI that makes existing physical infrastructure smarter,” said Walton. “My favorite example is in-store robotics. Through them, you get better pricing, better inventory, management and better presentation quality.”

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