Worldwide spending on GenAI is projected to reach US$644 billion in 2025, marking a 76.4% increase from 2024, according to a forecast by Gartner.

John-David Lovelock, Distinguished VP Analyst at Gartner, noted that expectations for GenAI’s capabilities are diminishing due to high failure rates in initial proof-of-concept (POC) work and growing dissatisfaction with current GenAI outcomes.

However, foundational model providers continue to invest billions each year to enhance the size, performance, and reliability of GenAI models. This paradox is expected to persist through 2025 and 2026.

In 2025, ambitious internal projects initiated in 2024 will face increased scrutiny as Chief Information Officers (CIOs) shift towards more predictable commercial off-the-shelf solutions to drive implementation and business value.

Despite ongoing improvements in models, CIOs are likely to scale back POC and self-development efforts, instead focusing on GenAI features offered by established software providers.

GenAI spending is anticipated to grow significantly across all core markets and submarkets in 2025, underscoring the transformative impact AI technologies will have on business operations and consumer products in the future.

Worldwide GenAI Spending Forecast (Millions of USD)

Source: Gartner (March 2025)

GenAI spending in 2025 will be primarily driven by the integration of AI capabilities into hardware, such as servers, smartphones, and PCs, with 80% of GenAI spending allocated to hardware.

“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,”

said Lovelock.

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

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