Dive Brief:
- A cloud data center building boom will help boost global IT spending to $5.26 trillion in 2024, increasing 7.5% year over year, according to Gartner research published Tuesday.
- The risk of not participating in the AI-optimization race is fueling hyperscaler investments in servers, semiconductors and other hardware to support generative AI projects, John-David Lovelock, distinguished VP analyst at Gartner, said. While data center systems amount to only a fraction of overall IT spending, Gartner expects year-over-year growth in the category to spike by 24%.
- AI consumption will also contribute to significant software market growth, driving spending to $1.1 trillion this year, up from $974 billion in 2023, the analyst firm forecasted. Software vendors will only see a fraction of the revenue stemming from generative AI add-ons, as much of it will go back to model providers, Lovelock said.
Dive Insight:
Last year’s large language model hype is driving increased spending across technology categories, from cloud infrastructure and enterprise software to IT consulting and business process services.
Hyperscalers embarked on an infrastructure spending spree during the first half of the year, with AWS and Microsoft committing tens of billions of dollars to data center upgrades and buildouts. Enterprises looking for colocation space may be out of luck as vacancy rates hit new lows.
“The compute power needs of genAI are being felt across the data center, and spending in that segment reflects this ravenous demand,” Lovelock said.
Gartner detected a slight slowdown in IT services spending felt by large technology consulting firms like Accenture during the first half of the year. Spending growth in the category is expected to be 7.1% year over year in 2024, a modest reduction from the nearly 10% increase Gartner forecast in April.
But budget hawkishness has given way to a reconstituted enterprise appetite for modernization.
“The change fatigue in CIOs that we saw at the start of the year has now abated and the contract backlogs going back to the third quarter of 2023 are being cleared,” Lovelock said. “We expect to see a larger rush towards the end of the year to make up for the slow start.”
