New Delhi, April 1 Global generative AI (GenAI) spending is expected to reach $644 billion in 2025, a surge of 76.4 per cent from 2024, a report said on Tuesday.
According to a forecast by Gartner, GenAI spending in 2025 will be driven largely by the integration of AI capabilities into hardware, such as servers, smartphones and PCs, with 80 per cent of GenAI spending going towards hardware.
“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 John-David Lovelock, Distinguished VP Analyst at Gartner.
“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,” he mentioned.
GenAI spending is poised for significant growth across all core markets and submarkets in 2025.
GenAI will have a transformative impact across all aspects of IT spending markets, suggesting a future where AI technologies become increasingly integral to business operations and consumer products.
“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,” said Lovelock. “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.”
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.” said Lovelock.
Gartner said its GenAI spending forecast methodology relies heavily on rigorous analysis of the sales by over a thousand vendors across the entire range of GenAI products and services.
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