GenAI spend growing despite declining expectations
Expectations for GenAI capabilities are declining but despite this, worldwide generative AI spending will total $644 billion in 2025, an increase of 76.4% from 2024, according to a forecast by market research firm Gartner.
“Expectations for GenAI’s capabilities are declining due to high failure rates in initial proof-of-concept work and dissatisfaction with current GenAI results,” says John-David Lovelock, VP 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.
“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. 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 proof-of-concept work and self-development efforts, focusing instead on GenAI features from existing software providers”.
The report says 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”.
“GenAI spending in 2025 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.”
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