Gartner Raises IT Spending Forecast For 2024 Again

November 11, 2024 Timothy Prickett Morgan

The boom of GenAI just keeps getting louder, and the increasing spending by the hyperscalers and clouds are giving air cover to IT shops all over the world who want to weave GenAI technologies into the applications and processes of their companies and who therefore want to get more IT budget.

IT spending forecasts are useful because they tell us where we think we are going and they also tell us how our IT shop measures up against the average of all of the IT shops in the world. The typical enterprise is definitely not spending anywhere near as much as the hyperscalers and cloud builders do on IT hardware and software. Enterprises spend more on services, relatively speaking compared to revenue size, because they do not have vast pools of IT talent like the hyperscalers and cloud builders do. (These tech giants tend to get the best talent, too, which is another force multiplier in their favor.) And finally, a positive IT forecast just makes us all feel better about what we are doing and how we can contribute to new ideas and deploy new technologies to move the business forward.

With that all in mind, we present to you a second upward revision in the 2024 IT spending forecast from Gartner, and its first forecast for spending in 2025 and some hints about where things might be way out in 2028.

Here is the 2024 and 2025 forecast:

Thanks to massive spending on GenAI systems, which are generally loaded up with very expensive GPU accelerators, overall spending on datacenter systems is exploding in 2024 and will continue to grow at a much-more-than-healthy clip in 2025 if the prognosticators at Gartner are correct.

To be specific, Gartner thinks that spending on servers, storage, and networking for the datacenters of the world will rise by 34.7 percent in 2024 to just a hair over $318 billion. We have not seen this kind of growth since the recovery after the crash in IT spending during the Great Recession, and this time around it is different because there is no crash ahead of such growth. Rather, this is a transformation in IT systems that is probably more impactful than the Dot Com boom.

To give this some perspective, a decade ago, datacenter systems spending was a mere $167 billion, and was more or less flat at just north of $170 billion in 2015, 2016, and 2017, rose to $210 billion in 2018, crashed by 20.6 percent back down to $174 billion in 2019 and stayed about the same at $179 billion in 2020. After that, thanks to the coronavirus pandemic, the vast spending on AI infrastructure among the tech titans, and a recovery of sorts for spending on generic systems by enterprises, governments, and academic institutions, datacenter systems spending has been on a pretty good pace. Some of that growth was due to inflation caused by too much demand chasing too little supply for AI systems. And as we have pointed out in the past, the general purpose server market was in recession throughout 2023 and the first half of 2024. The GenAI boom is making declines, or causing them, or both, in the rest if the systems market.

That growth is expected to slow in 2025, but still be well above the average over the past two decades, is no surprise to us. And frankly, we think there is a more than even chance that Gartner will revise the 2025 datacenter systems spending up in January and again in April. It is healthy to be skeptical, and given that the payoff for GenAI has been pretty low so far and the investment absolutely ginormous, you can understand why the people making intelligent guesses at Gartner are expecting for growth rates to decelerate by more than half in next year.

Here’s the interesting bit. Even with something shooting the gap between pessimism and ebullience, Gartner still expects the world to add an incremental $500 billion in overall IT spending every year from 2025 through 2028. That means IT spending will cross the $7 trillion mark in 2028, and if you assume a similar growth rate for datacenter systems spending, then it will hit $450 billion in 2028. That is at least three times what it was in the 2010s.

The question we have is: Can Power Systems ride the same GenAI boom? There are good reasons why this is the case, and we see no reason why IBM can’t double its Power Systems revenues – and perhaps even do better – between now and 2028. A lot depends on what happens with the Power11 and Power12 chips and the “Spyre” AI accelerators from IBM, which we have discussed a little bit in recent weeks.

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