Generative AI (GenAI) spending is projected to reach $644bn globally in 2025, marking a 76.4% increase from $365bn in 2024, according to a new report from Gartner. The surge in GenAI spending emphasises the growing integration of AI technologies across various sectors, with AI becoming increasingly central to both business operations and consumer products.
“Expectations for GenAI’s capabilities are declining due to high failure rates in initial proof-of-concept (POC) work and dissatisfaction with current GenAI results,” said Gartner distinguished vice president analyst John-David Lovelock. “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.
“Ambitious internal projects from 2024 will face scrutiny in 2025, 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.”
The Gartner study revealed that spending on GenAI services is projected to increase to $27.8bn in 2025 from $10.6bn in 2024, representing a growth rate of 162.6%, while spending on software is anticipated to rise from $19.2bn in 2024 to $37.1bn in 2025, indicating a growth rate of 93.9%
According to the report, spending on devices is expected to double from $199.6bn in 2024 to $398.3bn in 2025, maintaining a strong growth rate of 99.5%, while spending on servers is set to rise from $135.6bn in 2024 to $180.6bn in 2025, with a growth rate of 33.1%.
The forecast indicates that GenAI will significantly influence IT spending markets, with hardware integration playing a pivotal role. Approximately 80% of GenAI expenditure will be allocated to hardware, including servers, smartphones, and PCs. Gartner’s methodology for this forecast involved extensive analysis of sales data from over a thousand vendors offering GenAI products and services, using both primary and secondary research to compile a detailed market size database.
CFOs prioritise tech investment as GenAI spending set to rise
Another recent Gartner survey highlighted that technology investments are a priority for CFOs in 2025, with 77% planning to boost spending. Conducted between September and October 2024, the survey involved 301 senior finance executives. Of these, 47% intend to increase technology budgets by 10% or more, while 30% foresee moderate increases between 4% and 9%.
Conversely, 14% anticipate a slight reduction, and 6% expect to cut IT spending by 10% or more. These findings reflect a sustained move towards digital transformation, as organisations focus on automation, AI-driven decision-making, and cloud infrastructure to improve operational efficiency and scalability.
Read more: 77% of CFOs plan to increase tech spending in 2025 as cost pressures reshape budgets
