Worldwide spending on genAI to surge by hundreds of billions of dollars

CIOs should prepare for a 76.4% rise in global generative AI (genAI) spending this year, driven by improved foundational models and growing demand, according to a Gartner research report released today.

Organizations are expected to spend $644 billion worldwide on genAI projects despite high failure rates among early projects, the lion’s share of which will be on services.

GenAI services are expected to grow 162% this year after jumping 177% last year. GenAI software, which grew 255% in 2024, will only grow by 93% this year. Perhaps the biggest shift, however, is in genAI devices, which are predicted to rise 99.5% this year after soaring 845% last year.

The percentage of spending on genAI in various markets is leveling off because the adoption rate has increased. But, the overall amount being spent is notable. For example, organizations and consumers are expected to spend nearly $400 billion this year on genAI devices (PCs, smartphones and IoT devices) and $180 billion on servers.

Even as spending rises, expectations for the technology are dropping due to high failure rates in early tests and dissatisfaction with results, according to  John-David Lovelock, distinguished vice president analyst at Gartner

Still, model providers are investing billions to improve size, performance, and reliability; that paradox will continue through 2025 and 2026, Lovelock said.

Gartner Research

CIOs are expected to prioritize commercial genAI solutions over custom development, focusing on proven, off-the-shelf offerings for more reliable results and business value in 2025, Gartner said.

“Despite model improvements, CIOs will reduce proof-of-concept and self-development efforts, focusing instead on genAI features from existing software providers,” Lovelock said.

GenAI spending is poised for significant growth across all core markets and submarkets, including IT services, software, devices and servers. In fact, “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.

Consumer AI device spending

GenAI spending this year will be driven largely by the integration of AI capabilities into hardware, such as servers, smartphones and PCs, with 80% of genAI spending going towards hardware, Gartner said.

“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.”

In fact, for organizations, AI PCs could solve key issues organizations face when using cloud and data center AI instances, including cost, security, and privacy concerns, according to a study released this month by IDC Research.

This year is expected to be the year of the AI PC, according to Forrester Research. It defines an AI PC as one that has an embedded AI processor and algorithms specifically designed to improve the experience of AI workloads across the central processing unit (CPU), graphics processing unit (GPU), and neural processing unit, or NPU. (NPUs allow the PCs to run AI algorithms at lightning-fast speeds by offloading specific functions.)

The percentage of AI PCs in use is expected to grow from just 5% in 2023 to 94% by 2028, IDC said. The research firm surveyed 670 IT decision-makers from large companies in the US, UK, France, Germany, and Japan to explore their views on AI PCs. The November survey found that 97% of respondents plan to deploy AI to more employees in the future.

“This reflects a broader trend toward democratizing AI capabilities, ensuring that teams across functions and levels can benefit from its transformative potential,” said Tom Mainelli, IDC’s group vice president for device and consumer research. “As AI tools become more accessible and tailored to specific job functions, they will further enhance productivity, collaboration, and innovation across industries.”

Gartner Research projects PC shipments will grow by 7.7% in 2025. The biggest driver will be due, not the arrival of not AI PCs, but to the need by many companies and users to refresh their hardware and move toward Windows 11. (Windows 10 hits its end-of-support date this October.)

“Our assumption is that [AI PCs] will not drive shipment growth, meaning that most end users won’t replace their PCs because they want to have the AI. They will happen to select [an AI PC] if they will replace their PCs for specific reasons — e.g., OS upgrade, aging PCs, or a new school or job, and most importantly, the price is right for them,” Gartner analyst Mika Kitagawa said in an earlier statement.

For example, Windows 11 has several genAI features built in, and Apple has been slowly rolling out “Apple Intelligence” features for its hardware.

Nvidia chips, particularly the company’s GPUs, are already widely used in PCs. They’re popular for gaming, graphic design, video editing, and machine learning applications. Its GeForce series is especially well-known among gamers, while the Quadro and Tesla series are often used in professional and scientific computing. Many PC builders and gamers choose Nvidia processors for their performance and advanced features such as ray tracing and AI-enhanced graphics.

Nvidia isn’t the only manufacturer trying to get into the AI PC game. Samsung Electronics has started mass production of its most powerful SSD for AI PCs — the PM9E1. Intel earlier this year announced its line of “Ultra” chips, which are also aimed at genAI PC operations. And Lenovo just introduced its “Smarter AI” line of tools that include agents and AI assistants across a number of devices. Finally, AMD has touted new CPUs offering greater processing power tailored for AI operations.