Worldwide spending on generative AI (GenAI) is projected to reach $644 billion in 2025, up 76.4% from 2024, according to a new forecast by research firm Gartner, Inc.
“Expectations for GenAI’s capabilities are declining due to high failure rates in initial proof-of-concept (POC) work and dissatisfaction with current GenAI results,” said John-David Lovelock, analyst at Gartner. “Despite this, foundational model providers are investing billions annually to enhance GenAI models’ size, performance, and reliability. This paradox will persist through 2025 and 2026.”
Lovelock noted that ambitious internal projects from 2024 will face more scrutiny in 2025, as chief information officers (CIOs) lean toward commercial off-the-shelf solutions for more predictable outcomes and business value.
The role of AI-enabled devices on the expected growth
Gartner’s forecast is based on a detailed analysis of sales data from over a thousand vendors across the full spectrum of GenAI products and services. The methodology combines primary research with secondary sources to estimate market size and predict spending trends.
“Despite model improvements, CIOs will reduce POC and self-development efforts, focusing instead on GenAI features from existing software providers,” he said.
According to Gartner, the growth in GenAI spending will be substantial across core markets and submarkets. About 80% of the 2025 spending will be allocated to hardware, including servers, smartphones, and personal computers.
“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.”