Solid demand in key areas such as generative AI and cloud services looks set to engender a year to growth in the technology space. Or at least, that’s certainly the case according to a new report.

According to S&P Global Ratings, 2024 marked a transformative year for global IT, with hyperscale cloud providers driving significant investments in AI infrastructure. Despite challenges like macroeconomic pressures and cautious enterprise IT budgets, capital spending surged, reflecting a robust trajectory for the sector.

Below, we break down some of the crucial data and insights from S&P Global Ratings new report, titled Solid IT Demand Bodes Well For Technology Credits In 2025 highlighting the expected growth in IT services, software, and hardware markets, as well as the evolving role of hyperscalers and AI in shaping future trends.

IT Spending in 2025

S&P Global Ratings projects global IT spending to grow by 9% in 2025, surpassing 2024’s growth and far outstripping the forecasted global GDP growth of 3.0%. Key factors influencing this outlook include ongoing investments in generative AI, the transition to cloud-based solutions, and geopolitical uncertainties, particularly U.S. trade policy changes.

Hyperscalers and AI Monetisation

Hyperscalers are expected to maintain revenue growth above 20% in 2025, supported by the gradual monetisation of AI investments. While these companies are still in the early stages of monetising their AI investments, their cloud revenues grew by more than 20% in 2024. This growth reflects continued enterprise migration to the public cloud, driving overall IT services growth to approximately 7%.

Software spending, often overshadowed by AI’s rapid ascent, showed resilience with a 9% growth rate, underpinned by the recurring subscription model. However, smaller, sponsor-owned software providers faced significantly lower growth rates.

IT services overall are projected to grow by 8%, driven by cloud-native technologies and digital transformation initiatives. Meanwhile, software spending is forecast to accelerate slightly to a 10% growth rate, with AI-related investments playing a pivotal role.

Enterprise IT budgets are increasingly prioritising AI and cloud adoption, despite potential headwinds from macroeconomic conditions and regulatory compliance demands. Meanwhile, stricter cybersecurity regulations, such as the EU Cyber Resilience Act and the Digital Operational Resilience Act (DORA), are compelling businesses to allocate resources to compliance and security projects.

Hardware and Semiconductor Outlook

The hardware market is set to improve materially in 2025. Server shipments are projected to grow by 4%, with revenues rising significantly due to higher average selling prices (ASPs) of AI-enabled servers. The semiconductor industry is expected to grow by 12%, benefiting from the continued adoption of AI compute solutions and a rebound in non-AI-related demand.

However, China’s role as a major consumer of hardware and semiconductors – accounting for over 20% of global consumption – remains a wildcard. According to the report, any further deterioration in U.S.-China relations or supply chain disruptions could disproportionately impact global IT consumption.

Industry-Specific Trends

IT Services

The IT services industry is poised for robust growth according to the report, with an 8% increase anticipated in 2025.

Hyperscale cloud providers will lead the charge, achieving revenue growth exceeding 20%, while other IT services sectors are expected to recover with a 5% growth rate. Early signs of demand stabilisation were evident in the latter half of 2024, with providers reporting increased bookings for large transformation projects and improved annual contract values in key verticals such as financial services.

Hiring trends – a good indicator of future demand – have also started to recover after six consecutive quarters of decline. Generative AI aspirations will remain central to business objectives, driving investments in cloud adoption, compliance solutions, and digital transformation initiatives.

Interest rate cuts from the Federal Reserve and the European Central Bank are expected to alleviate budgetary pressures, potentially redirecting savings toward technology investments.

Software

Software spending is forecast to grow by 10% in 2025, slightly accelerating from 2024’s 9% growth.

AI-associated spending, although accounting for less than 10% of total software expenditures, is set to outpace overall software growth. Key drivers include enterprise digital transformation initiatives, the integration of AI into business automation workflows, and heightened focus on cloud and network security.

Leading software providers are already reaping the benefits of AI adoption. For example, Salesforce reported a threefold increase in deals exceeding $1 million that incorporated AI, while Microsoft’s Azure AI services achieved a revenue run rate exceeding $10 billion.

SaaS solutions, in particular, are expected to continue outpacing overall software growth, driven by their scalability, cost-efficiency, and ease of implementation.

Servers

The server market remains a cornerstone of IT infrastructure growth, according to S&P Global Ratings.

AI-optimised server shipments doubled in 2024, reaching approximately 1.3 million units, although they still represent just 10% of total shipments. Total industry revenues reached $197 billion in 2024, a 42% year-over-year increase. Looking ahead, server shipments are expected to grow by 4% in 2025, with revenues rising between 10% and 20%.

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However, traditional server shipments may remain flat as enterprises move off-prem and continue migrating to public cloud solutions.

Long-Term Outlook

According to the report, the technology sector is expected to become less cyclical as it matures, with industries such as healthcare and energy increasing their investments in AI to boost sales, accelerate R&D, and improve operational efficiency.

The report predicts that as-a-service spending will exceed 50% of enterprise technology budgets by 2025, highlighting the shift toward recurring, less volatile revenue streams.

However, pockets of volatility remain, particularly in hardware and semiconductor segments, as the pace of AI investments may not be sustainable beyond 2025.

The industry’s future will depend on balancing innovation with economic and geopolitical realities, ensuring that the transformative potential of AI continues to drive growth while mitigating risks associated with overreliance on specific markets or technologies.

Commenting on the findings, Andrew Chang, Technology Director, S&P Global Ratings, says: “We maintain a positive long-term view of the technology industry.

“Industries from health care to energy will increase their investments in IT, and AI in particular, to increase sales, hasten R&D, and achieve operational efficiency.”