Global GenAI spending to hit USD $644 billion by 2025

Worldwide generative AI (GenAI) expenditure is projected to reach USD $644 billion by 2025, signifying a 76.4% rise from 2024, according to data from Gartner.

John-David Lovelock, Distinguished VP Analyst at Gartner, remarked on the declining expectations for GenAI capabilities, pointing to the high failure rates in initial proof-of-concept work and dissatisfaction among users with current GenAI outcomes. "Despite this, foundational model providers are investing billions annually to enhance GenAI models' size, performance, and reliability."

"This paradox will persist through 2025 and 2026," Lovelock said.

Lovelock also noted that the ambitious internal projects planned for 2024 will encounter increased scrutiny in the following year. He stated, "As CIOs opt for commercial off-the-shelf solutions for more predictable implementation and business value, despite model improvements, CIOs will reduce POC and self-development efforts, focusing instead on GenAI features from existing software providers."

Growth in GenAI spending is anticipated across all core markets and submarkets in 2025, with a transformative effect expected to span across various IT spending markets. This suggests a shift towards the integration of AI technologies in business operations and consumer products.

A breakdown of worldwide GenAI spending forecasts indicates significant increases in several categories, including services and software. Notably, devices and servers are projected to see marked growth as AI capabilities become more integrated into hardware.

In 2025, 80% of GenAI spending is anticipated to be directed towards the integration of AI capabilities into hardware, such as servers, smartphones, and PCs. This trend is attributed to the increasing prevalence of AI-enabled devices. Lovelock commented on this growth trajectory, "The market's growth trajectory is heavily influenced by the increasing prevalence of AI-enabled devices, which are expected to comprise almost the entire consumer device market by 2028. However, consumers are not chasing these features. As the manufacturers embed AI as a standard feature in consumer devices, consumers will be forced to purchase them."

Gartner's methodology for forecasting GenAI spending involves a comprehensive analysis of sales data from more than a thousand vendors offering a wide range of GenAI products and services. This includes primary research augmented by secondary research sources, providing a robust database of market size data that supports Gartner's forecasts.

The insights provided by Gartner's spending forecast offer a unique perspective on GenAI expenditure across hardware, software, and IT services, enabling Gartner clients to understand the associated market opportunities and challenges. These insights are particularly beneficial for navigating the rapidly evolving landscape of AI technologies.

Further discussions on leadership trends will be highlighted at Gartner IT Symposium/Xpo. This event is positioned as a significant forum for CIOs and IT executives to explore technology, insights, and trends influencing the IT and business sectors, encompassing areas such as AI, business transformation, cybersecurity, and more.