Worldwide generative AI (GenAI) spending is projected to reach $644 billion in 2025, a 76.4 percent increase from 2024, according to a report from Gartner.
Despite growing investments, expectations for GenAI are declining due to high failure rates in early projects. Many companies will shift focus from in-house development to commercial solutions for better implementation and business value.
John-David Lovelock, Distinguished VP Analyst at Gartner, said: “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.”
Spending on AI devices will be $398.323 billion in 2025 as compared with $199.595 billion in 2024.
Spending on AI servers will be $180.62 billion in 2025 as compared with $135.636 billion in 2024.
Spending on AI software will be $37.157 billion in 2025 against $19.164 billion in 2024.
Spending on AI services will be $$27.760 billion in 2025 as compared with $10.569 billion in 2024.
The biggest driver of GenAI spending in 2025 will be AI-capable hardware, including servers, smartphones, and PCs, with 80 percent of the budget allocated to these devices. While AI-enabled devices are expected to dominate the market by 2028, consumer demand remains low, as manufacturers embed AI features as a standard.
The highest growth in 2024 was seen in the devices category, which surged by 845.5 percent, followed by software at 255.1 percent, services at 177.0 percent, and servers at 154.7 percent. In 2025, spending on devices will nearly double with a 99.5 percent increase, while software growth will slow to 93.9 percent.
Services spending will grow by 162.6 percent, and servers will see a more moderate increase of 33.1 percent. AI-capable consumer devices will play a crucial role in this expansion, driving significant investments in hardware.
Baburajan Kizhakedath
