Gartner to CIOs: Prepare to spend more money on generative AI

You know all that money your company may already be spending on generative AI products and projects? Well, be prepared to spend a lot more in the coming year.

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As generative AI, or gen AI, becomes more integral to business operations and consumer products, spending is expected to rise dramatically. In its latest forecast, Gartner predicts that the amount of money spent around the world on this hot flavor of AI will total $644 billion this year, an increase of 76.4% from last year.

The promise of gen AI 

One problem with gen AI, as it currently stands, is that the technology is still in its nascent stages and often flawed and fallible. This is typified by the tendency for AI to hallucinate or deliver inaccurate, incorrect, or misleading results. As a result, many CIOs and other tech executives have been disappointed with the high failure rates of AI.

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However, the promise of gen AI has led AI providers and other companies to continue investing billions of dollars in the technology. The goal is to enhance and improve the size, performance, and reliability of AI models to address current weaknesses.

Due to the existing limitations of gen AI, internal projects will face greater scrutiny this year, according to John-David Lovelock, Distinguished VP Analyst at Gartner. And where will companies then focus their time, energy, and money?

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

Breaking down the forecast

Some 80% of the increased spending on gen AI will focus on integrating AI into existing hardware, such as servers, PCs, and smartphones. But company spending on AI software and services will also surge. Breaking down its forecast for 2025, Gartner anticipates that businesses will spend $27.7 billion on services, $37.1 billion on software, $180.6 billion on servers, and $398.3 billion on devices, all dramatic increases from last year.

Looking ahead even further, Gartner expects that manufacturers will increasingly add AI skills to their devices, whether or not consumers necessarily want them.

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“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,” Lovelock added. “However, consumers are not chasing these features. As manufacturers embed AI as a standard feature in consumer devices, consumers will be forced to purchase them.”

No signs of stopping

The still untapped promises of gen AI and its often seen pitfalls are typified by a feature like Apple Intelligence. Apple touted its iPhone 16 lineup based largely on the benefits of generative AI to transform the way you work, play, and communicate. In reality, the feature has failed to deliver on those promises, with some of its promoted skills either not working as expected or being delayed further and further.

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But if Gartner is correct in its forecast, we’re on an AI ride that shows no signs of stopping. For now, vendors will continue to push gen AI into their products while customers wait for it to realize its potential. To further those goals, all sides will have to open their wallets in hopes that generative AI will become the game changer that it aspires to be.

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