Global spending on generative AI (GenAI) is projected to surge to $644 billion in 2025, marking a substantial 76.4 percent increase from 2024 levels, according to a new report by Gartner. The forecast suggests that the growing adoption of AI technologies across hardware systems, including servers, smartphones, and personal computers, will be a key driver of this expansion. Notably, 80 percent of the anticipated GenAI spending will be directed toward hardware integration.
Despite the impressive growth trajectory, the report acknowledges tempered expectations for GenAI’s capabilities due to persistent challenges. Initial proof-of-concept (POC) projects have encountered high failure rates, and dissatisfaction with current GenAI outcomes has led to a sense of disillusionment in some quarters. “Expectations for GenAI’s capabilities are declining due to high failure rates in initial POC work and dissatisfaction with current GenAI results,” said John-David Lovelock, Distinguished VP Analyst at Gartner.
Lovelock, however, pointed out that these obstacles have not deterred foundational model providers, who continue to invest billions of dollars annually to enhance the size, performance, and reliability of GenAI models. “This paradox will persist through 2025 and 2026,” he observed, highlighting the tension between the industry’s ambitious vision and the practical challenges of implementation.
GenAI’s transformative impact is expected to permeate all aspects of IT spending markets in 2025. According to the report, the market’s rapid growth will be heavily influenced by the increasing prevalence of AI-enabled devices, which are forecasted to dominate the consumer device market by 2028. Lovelock noted, “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, he added that consumer demand for such features remains subdued, with manufacturers embedding AI as a standard feature to drive adoption.
As businesses adapt to this evolving landscape, ambitious internal GenAI projects initiated in 2024 are likely to face heightened scrutiny in 2025. Gartner predicts that Chief Information Officers (CIOs) will shift their focus from self-developed solutions and experimental POC projects to more reliable, off-the-shelf GenAI features offered by established software providers. “Despite model improvements, CIOs will reduce POC and self-development efforts, focusing instead on GenAI features from existing software providers,” Lovelock remarked.
The report attributes its GenAI spending forecast to an in-depth analysis of sales data from over a thousand vendors across the entire spectrum of GenAI products and services. This rigorous methodology underscores the scale and complexity of GenAI’s economic impact, which is poised to reshape both business operations and consumer technologies in the years ahead.
While the report highlights the vast potential for growth, it also alludes to a cautious optimism among stakeholders. The dual forces of innovation and skepticism create a dynamic environment where the full realization of GenAI’s promise remains contingent on overcoming existing technical and operational hurdles. As the industry navigates these challenges, the projected rise in spending reflects a steadfast commitment to advancing the field, even amid mixed sentiments about its near-term capabilities.
