Gartner points to ‘declining expectations’ for GenAI – but not a decline in spendingGartner points to ‘declining expectations’ for GenAI – but not a decline in spending

The rise is expected to be led by generative AI’s influence, an increase in spend on servers and growth in software and IT services.

Gartner’s IT spending forecasts are based on analysis of the sales by over a thousand vendors across the IT sector. Data centre systems, devices and software will see double-digit growth in 2025, largely due to generative AI associated hardware upgrades, we’re told, however these upgraded segments “will not differentiate themselves in terms of functionality yet, even with new hardware.”

"GenAI is sliding toward the trough of disillusionment which reflects CIOs declining expectations for GenAI, but not their spending on this technology," said John-David Lovelock, Distinguished VP Analyst at Gartner. “For instance, the new AI ready PCs do not yet have ‘must have’ applications that utilise the hardware. While both consumers and businesses will purchase AI-enabled PC, tablets and mobile phones, those purchases will not be overly influenced by the GenAI functionality.”

“While budgets for CIOs are increasing, a significant portion will merely offset price increases within their recurrent spending. This means that, in 2025, nominal spending versus real IT spending will be skewed, with price hikes absorbing some or all of budget growth. All major categories are reflecting higher-than-expected prices, prompting CIOs to defer and scale back their true budget expectations.”

Meanwhile spending on AI-optimised servers will double the spending on traditional servers in 2025 to reach $202 billion dollars, we’re told.

Lovelock added: “IT services companies and hyperscalers account for over 70% of spending in 2025. By 2028, hyperscalers will operate $1 trillion dollars’ worth of AI optimised servers, but not within their traditional business model or IaaS Market. Hyperscalers are pivoting to be part of the oligopoly AI model market.”

This all tallies with the analyst’s predictions from late last year that said the move to AI is driving a surge in spending on data centre infrastructure and IT services in Europe, and that IT spending across the continent will come in at US$1.28 trillion in 2025. Presumably it takes a little longer to gather up the data necessary for predictions across the whole world.