Dive Brief:
- CIOs are bracing for price hikes across spending categories this year as generative AI continues to shape enterprise tech strategies, according to a Gartner report published Tuesday.
- Increased technology costs will consume all or most of IT budget growth, according to Gartner. “All major categories are reflecting higher-than-expected prices, prompting CIOs to defer and scale back their true budget expectations,” John-David Lovelock, Gartner distinguished VP analyst, said.
- Gartner forecasts spending on software, data center systems and devices to grow by double-digits year over year, due largely to generative AI hardware upgrades. Investments in AI-optimized servers will account for twice the spending on traditional servers, the analyst firm said.
Dive Insight:
Generative AI is pumping up costs across the board as vendors double down on the technology. The race to embed copilots and agents in software services and invest in GPU compute capacity is adding to enterprise bills, whether CIOs like it or not.
“CIOs were buying things they were interested in last year,” Lovelock told CIO Dive. “This year, they’re going to be sold PCs with AI in it, software with AI in it and services with AI in it — they’re going to be drowning in AI options.”
Gartner expects worldwide IT spend to grow by 9.8% to $5.6 trillion, an uptick over last year’s 7.7% growth rate. While generative AI remains a key growth driver, strategies and sentiments have changed.
Enterprises focused last year on proof-of-concept work and experienced higher than expected failure rates as they ran into data deficiencies, skills gaps and disappointing ROI.
“From a hype cycle point of view, we’re on the wrong side of the peak with all those failures,” Lovelock said. “We now have expectations for the technology coming down. CIOs, CEOs and boards are still talking about generative AI but expectations have come way down.”
For tech services companies, spending patterns reflected a far rosier perception.
Investments in data center hardware and software hit an all-time high in 2024, growing 34% year over year to $282 billion, according to Synergy Research Group. The firm traced more than half of all infrastructure spending back to hyperscale cloud providers.
Gartner sees the trend continuing, with IT services companies and hyperscalers accounting for over 70% of tech investments in 2025.
