AI Growth to Outpace IT Hardware as Spending Plateaus

Global enterprise IT budgets are being reshaped by the surge in artificial intelligence, with IDC warning that traditional hardware spending is set to plateau as AI absorbs future growth.

According to the research firm’s latest Worldwide Artificial Intelligence IT Spending Market Forecast, global AI investment is expected to expand at a compound annual growth rate of 31.9% between 2025 and 2029, reaching $1.3 trillion by the end of the forecast period.

That trajectory is being driven by the rise of Agentic AI – systems that can operate independently or in coordinated fleets to execute tasks, manage workflows, and build new applications. IDC’s analysis suggests these developments will increasingly determine how IT leaders prioritize budgets, with dollars flowing toward platforms that build, manage, and secure agents rather than into general-purpose compute.

“Application and services providers that fail to embed AI deeply into their products risk losing share to those that do,” said Rick Villars, Group Vice President of Worldwide Research at IDC. “The alignment between investment growth and IT leaders’ trust in AI’s ability to shape business outcomes is undeniable. Those who hesitate will fall behind.”

While cloud providers and hyperscalers are expected to continue building dense, compute-heavy environments to run these workloads, IDC forecasts that other parts of the IT stack will stagnate. Spending on traditional non-AI servers and storage, in particular, is projected to flatten as enterprises and service providers pursue efficiency and consolidation rather than expansion. In effect, AI will become the gravitational force that captures spending growth that once flowed into conventional hardware refreshes.

Spending on AI-enabled Applications

The shift underscores how AI is not simply another workload but a restructuring force across the enterprise technology landscape. IDC projects service providers will account for 80% of infrastructure spending through 2029, reflecting the scale required to support massive agentic environments. At the same time, spending on AI-enabled applications will outpace all other segments, triggering competitive realignment across the software industry.

Crawford Del Prete, President of IDC, highlighted the organizational implications of this shift. “As agents become more commonplace, roles inside enterprises will evolve rapidly. Some will see productivity gains, others will become redundant. Both workers and enterprises will need to adapt with unprecedented agility,” he said.

The consequences extend beyond budgets. Enterprises embracing AI are expected to adopt AI-driven network operations, anomaly detection, and self-healing capabilities to streamline IT management. These changes will accelerate digital transformation, but they also concentrate risk – placing greater importance on leadership and strategy in navigating the transition.

IDC’s forecast suggests a future in which AI-driven innovation defines competitive advantage while reshaping the tech stack beneath it. Traditional IT hardware will remain, but its growth curve will flatten, overshadowed by the acceleration of agentic systems and AI-enabled applications. For enterprise CIOs, the challenge is not just whether to invest in AI, but how to reallocate budgets from legacy infrastructure toward the emerging foundation of digital business.