In the midst of the artificial intelligence (AI) boom, a number of IT companies have raised their capital expenditures to invest in AI, driving up the sector’s global spending.
According to a report released on Tuesday, research and consultancy firm Gartner predicts that AI will be the driving force behind the 7.5% increase in worldwide IT spending from 2023 to $5.26 trillion in 2024.
According to Gartner, as Big Tech companies like Microsoft (MSFT), Alphabet (GOOGL), Meta Platforms (META), and Amazon (AMZN) boost their spending to invest in AI infrastructure necessary to train and run AI technology, data-center segments will see the greatest growth in investment.
According to Gartner research, while data center expenditures should be considered as a portion of an organization’s AI investment, some software expenditures may be perceived as a “tax” since a portion of the profits from generative AI features are returned to partners who provide AI models.
Spending on Data Centers Will Increase Most in 2024
It is anticipated that data center system spending will drive the IT sectors. According to Gartner, data center spending will reach $293.09 billion in 2024, a 24.1% rise from the previous year.
According to the experts, “increased planning for GenAI is largely to blame” for this surge in spending.
According to Gartner VP Analyst John-David Lovelock, “the compute power needs of GenAI are being felt across the data center, and spending in that segment reflects this ravenous demand.”
Investment bank William Blair’s stocks strategist countered that the “ongoing economic expansion” has been bolstered by substantial investments in AI infrastructure, such as data centers and electrical machinery.
GenAI Impacting Programs Similar to a “Tax”
Although software spending is predicted to grow at the second-highest rate after the data center industry, according to Gartner researchers, this spending is more akin to a tax than an investment.
Lovelock stated that while the effects of GenAI are “being felt across all technology segments and subsegments, not to everyone’s benefit.”
According to the researchers, “Some software spending increases are attributable to GenAI, but to a software company, GenAI most closely resembles a tax” as “revenue gains from the sale of GenAI add-ons or tokens flow back to their AI model provider partner.”
Software IT spending is expected to reach approximately $1.1 trillion in 2024, up 12.6% from 2023, according to Gartner.