A new forecast from Gartner, the technological research and consulting company, has predicted that worldwide generative artificial intelligence (GenAI) spending is expected to total $644 billion (£500bn~) in 2025.

“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,” noted John-David Lovelock, a distinguished VP 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.

“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,” he explained.

“Despite model improvements, CIOs will reduce POC and self-development efforts, focusing instead on GenAI features from existing software providers.”

AI Capable Consumer Devices to Drive GenAI Spend

GenAI spend is poised for significant growth across all core markets, including in services, software, devices, and services, as well as submarkets.

That said, it’ll largely be driven by the integration of AI capabilities into hardware, such as services, smartphones, and PCs.

In terms of specific numbers, GenAI spending across devices this year is expected to see a nearly 100% growth over 2024, with spend to increase to nearly $400bn (£310bn~), equating to a significant portion of overall predicted spend for GenAI in 2025.

Meanwhile, GenAI spending related to servers is thought to increase by 33% this year, with 2025’s spend forecast to be $180bn (£140bn~).

When it comes to GenAI spend concerning software, it’ll see a 94% growth, according to Gartner, and a spend of $37bn (£29bn~).

As for GenAI spending across services, it’s forecast to be $27.7bn (£21bn~), representing an increase of over 160% over 2024.

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“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,” added 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,” he remarked.