Generative AI Spending to Surge 76.4%, Hitting 644B in 2025: Says Report

Global spending on generative AI (GenAI) is projected to reach $644 billion in 2025, reflecting a 76.4% rise from 2024, as stated in a report by Gartner.

"Expectations for GenAI's capabilities are declining due to high failure rates in initial proof-of-concept (POC) work and dissatisfaction with current GenAI results," remarked John-David Lovelock, VP Analyst 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," he stated.

He believes that GenAI expenditures are set to experience substantial expansion in every primary market and submarket by 2025.

It will create a transformative effect throughout all areas of IT expenditure markets, indicating a future where AI technologies become more essential to business functions and consumer items.

"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," remarked Lovelock.

"Despite model improvements, CIOs will reduce POC and self-development efforts, focusing instead on GenAI features from existing software providers," he added.

Lovelock states that this expenditure will mainly be fueled by the incorporation of AI features into devices like servers, smartphones, and PCs, with 80% of GenAI investment directed at hardware.

"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," he noted.