Gartner: Gen AI nearing trough of disillusionment; GSMA survey of network operator use of AI
Global IT spending is expected to total $5.61 trillion in 2025, an increase of 9.8% from 2024, according to the latest forecast by Gartner, Inc.
“While budgets for CIOs are increasing, a significant portion will merely offset price increases within their recurrent spending,” said John-David Lovelock, Distinguished VP Analyst at Gartner. “This means that, in 2025, nominal spending versus real IT spending will be skewed, with price hikes absorbing some or all of budget growth. All major categories are reflecting higher-than-expected prices, prompting CIOs to defer and scale back their true budget expectations.”
GenAI will Influence IT Spending, but IT Spending Won’t Be on GenAI Itself:
Segments including data center systems, devices and software will see double-digit growth in 2025, largely due to generative AI (GenAI) hardware upgrades (see Table 1). However, these upgraded segments will not differentiate themselves in terms of functionality yet, even with new hardware.
Table 1. Worldwide IT Spending Forecast (Millions of U.S. Dollars)
2024 Spending |
2024 Growth (%) |
2025 Spending |
2025 Growth (%) |
|
| Data Center Systems | 329,132 | 39.4 | 405,505 | 23.2 |
| Devices | 734,162 | 6.0 | 810,234 | 10.4 |
| Software | 1,091,569 | 12.0 | 1,246,842 | 14.2 |
| IT Services | 1,588,121 | 5.6 | 1,731,467 | 9.0 |
| Communications Services |
1,371,787 |
2.3 | 1,423,746 | 3.8 |
| Overall IT | 5,114,771 | 7.7 | 5,617,795 | 9.8 |
Source: Gartner (January 2025)
“GenAI is sliding toward the trough of disillusionment which reflects CIOs declining expectations for GenAI, but not their spending on this technology,” said Lovelock. “For instance, the new AI ready PCs do not yet have ‘must have’ applications that utilize the hardware. While both consumers and enterprises will purchase AI-enabled PC, tablets and mobile phones, those purchases will not be overly influenced by the GenAI functionality.”
Spending on AI-optimized servers easily doubles spending on traditional servers in 2025, reaching $202 billion dollars.
“IT services companies and hyperscalers account for over 70% of spending in 2025,” said Lovelock. “By 2028, hyperscalers will operate $1 trillion dollars’ worth of AI optimized servers, but not within their traditional business model or IaaS Market. Hyperscalers are pivoting to be part of the oligopoly AI model market.”
Gartner’s IT spending forecast methodology relies heavily on rigorous analysis of the sales by over a thousand vendors across the entire range of IT products and services. Gartner uses primary research techniques, complemented by secondary research sources, to build a comprehensive database of market size data on which to base its forecast.
More information on the forecast can be found in the complimentary Gartner webinar “IT Spending Forecast, 4Q24 Update: GenAI’s Impact on a $7 Trillion IT Market.”
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Gartner’s 2025 forecast for IT spending is consistent with the market research firm’s predictions from late last year that the move to AI is driving a surge in spending on data center infrastructure and IT services in Europe. IT spending across the continent will come in at US$1.28 trillion in 2025 they said. Presumably it takes a little longer to gather up the data necessary for predictions across the whole world.
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Separately, Citi analysts expect 2025 growth to be largely driven by continued AI spending as data center capital expenditure for the biggest cloud service providers is forecasted to increase by 40% this year.
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In a recent survey of network operators, GSMA found that telcos are allocating more resources to in-house and out-of-house AIs capabilities and projects, but only a subset are spending more than 15% of their digital budgets on AI. Nearly half of operators are dedicating 5% to 15% of their digital budgets towards AI, covering a range of categories, including data systems, large language models and infrastructure upgrades, the GSMA survey found. That AI money is also being allocated toward AI teams, tools and partnerships, said GSMA. The association, which primarily represents mobile operators, has been asked for more details about the size, scope and methodology of its latest study.
AI Status at Network Operators:
References:
The market for RAN equipment and software is shrinking as telcos tighten their belts. After spending $45 billion in 2022, they spent $40 billion in 2023 and are expected to have spent about $35 billion last year, according to the midpoint of the latest forecast from Omdia (owned by Informa).
Both Ericsson and rival Nokia are already known to be exploring the redesign of RAN software for compute unified device architecture (CUDA), the platform used by Nvidia. Both are part of the Nvidia-backed AI RAN Alliance and feature in a separate initiative that involves Nvidia and T-Mobile US. Nokia already runs less computationally demanding RAN software on Arm-based chips in some of its latest 5G products. Moving that to an Nvidia CPU would seemingly be quite straightforward.
Would a dominant Nvidia in AI, as critical to multiple industries as Intel has been in data centers and PCs, be desirable? A criticism of virtual RAN is that at the processor level it has continued to lack alternatives to Intel, despite much talk in the last two or three years about the emergence of AMD, an x86 rival, and Arm as viable alternatives. Nvidia as another option in a healthily competitive market, rather than a direct successor to Intel, would surely look much better.
https://www.lightreading.com/ai-machine-learning/what-the-500b-stargate-ai-plan-could-mean-for-telecom
I recall implementing AI solutions for our company’s network operations a few years ago, only to face significant challenges in scaling and integrating them with existing systems. It was an experience that now seems to align with Gartner’s predictions of Gen AI nearing the trough of disillusionment.
During Orange’s FY 2024 earnings call Orange Group CEO Christel Heydemann highlighted the potential for operational savings from AI but stressed that it isn’t replacing the human workforce anytime soon. Asked during the Q&A portion of the call about the headcount requirements in the medium term and the impact of AI, she said that “at this stage, the technology is really far from replacing humans,” adding that she thinks “it will never actually replace humans, or it should not replace humans.”
The technology is driving efficiency for pre-sales, developer and customer services teams, she said, but stressed it will in her view enrich rather than replace employees.
Her remarks seem to contrast somewhat with those made by Deutsche Telekom executives, who seemed blunter about the technology’s capacity to slash the workforce. https://www.lightreading.com/ai-machine-learning/artificial-intelligence-to-eat-jobs-at-deutsche-telekom
AI is expected to generate over €300 million ($312 million) in “operational efficiencies,” meaning revenue uplift, opex and capex gross savings, in 2025 as the company is on track in its plan to save €600 million ($624 million) by the end of this year.
AI was one of the big themes during the presentation, which came only a day after the group announced a partnership with Mistral AI, through which both parties seek to design an optimal network infrastructure for AI, assessing the impact of AI on networks.
It will also see Mistral’s applications, such as Le Chat Pro and Codestral, integrated into Orange’s product suite. Moreover, Mistral products will be part of Orange Business’ Live Intelligence offer.
https://www.lightreading.com/ai-machine-learning/orange-ceo-hails-ai-efficiencies-but-stresses-it-shouldn-t-replace-humans