Gen AI Spending To Reach $644 Billion In 2025: Gartner

Even as expectations for generative AI’s capabilities are dwindling due to significant failure rates in initial proof-of-concept work and discontent with existing gen AI outcomes, foundational model providers are putting in billions of dollars annually to improve the size, performance, and reliability of gen AI models.

According to a forecast by consulting firm Gartner Inc., worldwide gen AI spending is expected to total $644 billion in 2025, an increase of 76.4% from 2024, and the increased spending on gen AI is expected to persist through 2026. This is despite the reduced percentage spending growth as compared to that in 2024 over 2023: 336.7%. 

Gen AI spending is poised for significant growth across all core areas in 2025, including services, software, devices and servers. Spending on services will have the most notable increase (162.6%), followed by devices (99.5%) and software (93.9%).

According to Gartner, gen AI 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.

However, ambitious AI projects will face scrutiny, and tech leaders will look for commercial off-the-shelf solutions. Despite model improvements, proof-of-concept work and self-development efforts are expected to reduce, with focus shifting to gen AI features from existing software providers.

According to the forecast, gen AI spending in 2025 will be driven largely by the integration of AI capabilities into hardware, such as servers, smartphones and personal computers, with 80% of gen AI spending going toward hardware.

The growing number of AI-enabled devices, which are predicted to account for nearly all of the consumer device market by 2028, has a significant impact on the market’s growth trajectory.

While consumers aren’t chasing gen AI features for their devices, they will eventually have to pay for them as manufacturers embed the technology as standard in consumer devices.