Companies will spend almost $644 billion on generative AI, despite the tech's high failure rates

Editor's take: Judging from the discourse in my communication bubble, almost no one likes AI technologies. The most enthusiastic AI evangelists are vendors interested in selling you something AI-related to cash in on the craze or the companies creating it and shoving it down our throats.

A recent Gartner analysis reports that spending on generative AI (GenAI) will grow to unprecedented levels in 2025, even though very few organizations understand how this technology can help their businesses or profit prospects. Experts believe this market "paradox" trend will persist through 2025 and 2026.

Global spending on GenAI will reach around $644 billion in 2025, a 76.4-percent increase compared to 2024. This spending trend comes despite the technology's lack of actual usefulness and error rate. Gartner VP Analyst John-David Lovelock says foundational model providers are investing billions in developing and enhancing their solutions regardless of the growing concerns about the technology.

This year, internal projects with lofty goals will face increased scrutiny, Lovelock stated. Chief investment officers will likely opt for commercial, off-the-shelf solutions, while proof-of-concept experimentations and self-developed implementations should become the exception. GenAI prospects haven't been as ambitious lately, but the technology should still significantly impact all IT spending this year.

Experts expect AI technologies to become integral to all kinds of business operations and consumer products. This forced integration will be primarily due to AI capabilities baked directly into consumer hardware, with servers, smartphones, and PCs absorbing 80 percent of the projected GenAI spending.

Lovelock notes that the growing prevalence of AI-enabled devices is driving market growth, with these consumer electronics expected to make up nearly the entire market by 2028. However, end consumers don't seem as enthusiastic about GenAI, as they're not actively seeking these "extra" features when shopping for new devices. Regardless, manufacturers continue embedding AI as a standard in mass-market products, ultimately forcing consumers to adopt it.

Developers have adopted a service model that says, "You will consume our product, even if you don't want it." It sounds like a page out of Microsoft's playbook back in the day.