Gartner projects waning hype for GenAI in IT — but not a decline in spending

Generative AI and IT infrastructure spending are projected to drive global IT expenditure to $5.61 trillion by 2025, according to new Gartner forecasts, representing a 9.8% increase from 2024.

Market dynamics and spending patterns: The IT sector is experiencing significant shifts in investment priorities, particularly in areas supporting artificial intelligence capabilities.

• Data center systems, devices, and software segments are forecasted for double-digit growth in 2025, driven primarily by necessary hardware upgrades to support AI capabilities
• IT services companies and cloud providers (hyperscalers) are expected to dominate spending, accounting for over 70% of expenditure in 2025
• Spending on AI-optimized servers is projected to double compared to traditional servers, reaching $202 billion in 2025

Technology adoption landscape: Despite some tempering of expectations around generative AI, actual spending continues to show strong momentum.

• Gartner analyst John-David Lovelock indicates that generative AI is entering a phase of more realistic expectations, though this hasn’t impacted spending plans
• Current AI-ready PCs face adoption challenges due to a lack of compelling applications that fully utilize their enhanced hardware capabilities
• CIOs are maintaining their spending levels, with budget increases generally keeping pace with rising costs in recurring expenditures

Infrastructure transformation: Cloud providers are making unprecedented investments in AI infrastructure, signaling a major shift in computing architecture.

• Hyperscale cloud providers are projected to operate $1 trillion worth of AI-optimized servers by 2028
• This massive infrastructure investment aligns with previous Gartner predictions about increased data center and IT services spending, particularly in European markets
• The transition to AI-optimized hardware represents a fundamental shift in enterprise computing architecture

Market implications: The substantial investments in AI infrastructure suggest a transformation in how computing resources will be deployed and consumed in the coming years.

• The concentration of spending among hyperscalers indicates a further consolidation of computing power among major cloud providers
• The gap between AI expectations and practical applications points to a period of adjustment as the technology matures
• Enterprise IT strategies will likely need to balance immediate AI adoption pressures with practical implementation capabilities

Future outlook: While immediate expectations for generative AI applications may be moderating, the sustained high levels of infrastructure investment suggest the technology industry is preparing for widespread AI adoption in the longer term, though the timeline for realizing practical benefits may be longer than initially anticipated.