Generative AI spending is surging worldwide as businesses integrate AI capabilities into hardware, software, and services despite persistent technological limitations. Gartner’s latest forecast reveals a shift in corporate strategy as companies move away from ambitious internal AI projects toward commercial solutions that offer more predictable implementation and value. This strategic pivot comes during a critical phase where generative AI’s potential remains largely unfulfilled, creating tension between soaring investment and uneven real-world performance.
The big picture: Global spending on generative AI will reach $644 billion in 2025, a dramatic 76.4% increase from last year, according to Gartner’s latest forecast.
- Hardware integration will consume about 80% of this increased spending, with manufacturers embedding AI capabilities into servers, PCs, and smartphones.
- By 2028, Gartner expects AI features to become standard in nearly all consumer devices, regardless of whether consumers specifically demand these capabilities.
Why this matters: Despite significant investment, generative AI remains technologically immature, with hallucinations and inaccuracies undermining its reliability and business value.
- The disconnect between AI’s current limitations and its promised potential is creating a challenging environment for CIOs who must justify continued investment.
- Apple Intelligence exemplifies this tension, with features either underperforming or facing continued delays despite being central to iPhone 16 marketing.
Behind the numbers: Gartner’s forecast breaks down 2025 generative AI spending across multiple categories, showing how investment is flowing across the AI ecosystem.
- Companies will spend $27.7 billion on AI services and $37.1 billion on AI software.
- Device-related expenditures will reach $398.3 billion, while server-related spending will total $180.6 billion.
What they’re saying: Gartner’s Distinguished VP Analyst John-David Lovelock believes 2025 will mark a turning point in how companies approach generative AI implementation.
- “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 noted.
- He also observed that “consumers are not chasing these features. As manufacturers embed AI as a standard feature in consumer devices, consumers will be forced to purchase them.”
The bottom line: The generative AI market shows no signs of slowing despite technological shortcomings, creating a situation where vendors and customers continue investing heavily while waiting for the technology to mature into the transformative force it promises to become.
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