AI investments are draining budgets from other critical tech initiatives, says report

AI has become the top technology investment priority for organizations, reshaping IT project roadmaps and causing CIOs to deprioritize other critical technology initiatives. As executive leadership demands AI adoption, tech leaders report that AI projects now consume nearly triple the IT budget compared to last year, according to Lenovo and IDC’s 2025 CIO Playbook. This strategic pivot creates potential vulnerabilities as organizations shelve modernization efforts and other emerging technologies to accommodate AI’s financial demands.

The big picture: Organizations are making significant tradeoffs to accommodate AI investments, creating potential long-term risks as other critical IT initiatives get delayed or canceled.

• CIOs report that while IT budgets have increased in 2025 compared to 2024, these increases aren’t sufficient to fund all planned technology initiatives.
• Executive pressure to prioritize AI has forced technology leaders to redraw priority lines, often at the expense of foundational systems and infrastructure.
• As Dhaval Moogimane of West Monroe consulting firm notes, “Budgets are finite, and because AI investments are an imperative for CEOs, the boards, and CIOs to support the business functions, AI shrinks the dollars available for other initiatives.”

Key sacrifices: Organizations are shelving critical projects that could undermine future technological capabilities.

• Many companies have completely paused experimentation with other emerging technologies to concentrate resources on AI initiatives.
• Technical debt reduction and legacy system modernization efforts are being deprioritized, potentially creating future bottlenecks.
• According to research, 73% of tech leaders believe AI trends are diverting funds from more valuable data and analytics initiatives.

Long-term risks: The current AI prioritization creates several potential vulnerabilities for organizations.

• Companies may fall behind in other emerging technologies that could prove strategically important.
• Unaddressed legacy technology could eventually limit an organization’s ability to capitalize on future AI opportunities.
• Delaying transformation efforts may make them increasingly expensive and difficult to implement later.

Recommended approach: Experts advise a more balanced strategy that aligns AI with broader business goals.

• Organizations should prioritize solving business problems rather than implementing technology for technology’s sake.
• Strong governance frameworks help ensure AI investments deliver measurable returns.
• Foundational data and infrastructure investments should continue alongside AI initiatives.
• As Principal Financial Group CIO Kathy Kay explains: “We’re aligned on the highest priorities and initiatives that will help move our company forward. It helps sort out which shiny objects will move us forward and which ones won’t.”