Back in early September, the prognosticators at IDC put out an ebullient but simple AI spending forecast going out to 2029, and Gartner followed suit with a much more detailed AI spending forecast, which we augmented and expanded with the help of the market researcher a few weeks later. Now, Gartner has circled back and revised its overall IT spending forecast given the explosive spending on GenAI hardware for the model builders and their partners.
This bigtime spending, says Gartner, is finally spurring investments by enterprises, particularly for AI-infused software that is more expensive than prior generations of code that did not have it. People are definitely paying for copilots and code assistants and other AI functions in their ERP, SCM, CRM, and other suites. And that, as well as the humongous datacenter system spending by the AI model builders and their cloud partners, is driving IT spending to new heights, with the expectation for overall global IT spending, as reckoned in US dollars, rising above $6 trillion for the first time in 2026.
That IT spending level is about a year ahead of schedule, based on a Gartner forecast that came out only in July. And based on past statements by Gartner, the datacenter systems spending levels that are now expected in 2026 are higher than the forecast that was made for 2028 earlier this year.
This GenAI boom has gone from chemical to nuclear fission, and perhaps there will be nuclear fusion at some point to really blow the forecasts to kingdom come.
Here is the October 22 forecast for spending for 2025 and 2026 by the usual categories of datacenter systems, enterprise software, IT services, devices, and telecom services:
We have kept the old category names in some cases because they are better.
In looking at that table above, to paraphrase the great Paul Hogan: That’s not a table – this is a table:
You can get a feel of things from our big table above, which is based on historical Gartner data, a whole lot better than you can from the little one Gartner has put together. Gartner, of course, has a multidimensional database with a zillion categories and geographies that probably has a natural language processing front end by now for those of you who really want to surf historical data. That would be a freaking sword.
Anyway. The IT spending forecast for 2025 is now $104.9 billion higher than the prediction that Gartner was making back in July, and is now expected to be $5.54 trillion, up 10 percent from the $5.04 trillion that was spent for all IT hardware, software, and services back in 2024. The level of IT spending expected in 2025 worldwide is now almost precisely what Gartner was expecting in 2026 earlier this year.
Gartner’s latest numbers put datacenter systems spending at $333.4 billion in 2024, which is about 2X that of spending levels before the coronavirus pandemic and represents a 40.3 percent growth sequentially from 2023’s $238.6 billion in datacenter systems spending. (Datacenter systems means servers, switches, storage, and other IT gear in the datacenter.)
If you think 2X is a lot, it is going to almost double again in two years. Gartner expects datacenter systems spending to rise by 46.8 percent this year to $489.5 billion in 2025, and while spending will cool next year, it is now expected to still grow by 19 percent to $582.5 billion.
As you can see from our big table above, the growth rates for datacenter systems spending this year and in the coming year are crazy multiples of global gross domestic product increases as expressed in US dollars, which we have obtained from the World Bank. GenAI is absolutely the fuel of this growth, but there are other factors at work. Inflation is one of those factors:
If you adjust the Gartner datacenter systems spending by the US Consumer Price Index using the average of the expected inflation rates for 2025 and 2026 coming from various forecasts, what you find is that a lot of the extra money that is being spent is the cumulative effect of inflation.
In our inflation adjustment above, we are using 2021 US dollars and adjusting all data before and after that time. As you can see, inflation adjustment makes past spending look bigger and future spending look smaller. For instance, the cumulative effect of inflation from 2022 through 2026 inclusive adds $103.1 billion to the raw spending numbers. So, to that way of looking at it, the spending is not as high as it looks. But even with the inflation adjustment, the spending increase on datacenter systems from 2019, before COVID hit, and 2026, is a factor of 2.55X. Which is a lot, even if it is not the 3.35X that you get from using the raw numbers that have not been adjusted for inflation by Gartner.
We also like to look at IT spending in general and for datacenter systems in particular as reckoned against global GDP growth, which has had its forecasts recently raised and which we updated in our table above.
In this table above, core IT spending means datacenter systems, enterprise software, and IT services. Overall IT spending adds in spending on telecom and datacom services as well as for devices such as PCs, tablet, and smartphones.
As you can see, core IT spending growth tends to be higher than for overall IT spending growth in any given year, which in turn tends to be higher than global GDP growth in a year. It takes a big event – like a pandemic in 2020 – to change the amplitudes on these signals.