Research company Gartner anticipated worldwide spending on generative AI (genAI) to reach $644 billion in 2025, marking a surge in investment as industries increasingly adopt solutions powered by the technology.
The estimate marks a 76 per cent increase in genAI spending from 2024. Gartner attributes this growth to the expanding application of genAI across sectors, with the technology expected to become deeply embedded into consumer products and business.
Hardware is expected to account for 80 per cent of overall genAI spending in 2025, with the integration of AI capabilities into devices such as servers, smartphones, and PCs expected to be a major driver for investment. Meanwhile, software spending is set to nearly double from $19.2 billion in 2024 to $37.2 billion in 2025.
Gartner VP analyst John-David Lovelock noted that AI-enabled devices are forecasted to comprise “almost the entire consumer device market by 2028”. However, he pointed out that consumer demand is not a driver this shift; instead, as manufacturers increasingly embed AI as a default feature across devices, “consumers will be forced to purchase them”.
Despite optimistic findings about investment in genAI, expectations around the technology’s capabilities are expected to become more tempered. Lovelock noted that high failure rates in initial proof-of-concept projects and disappointing AI generated results have led to declining confidence in immediate impact.
Yet, foundational model providers continue to invest billions annually to improve genAI model sizes, performance, and reliability. “This paradox will persist through 2025 and 2026,” he added.