AI boom will increase IT spending next year

To help you understand the trends surrounding AI and other emerging technologies and what to expect in the future, the experienced Kiplinger Letter team will keep you updated on the latest developments and predictions. (Get a free issue of Kiplinger Letters or subscribe.) Subscribe to get all the latest news first, but we’ll publish many (but not all) of our predictions online in the coming days. Here is the latest information…

This is a repeat of the heyday of the 1990s for IT sellers. “AI is driving the strongest IT spending growth since 1996,” said Stephen Minton, an analyst at technology market research firm IDC.

According to technology market research firm Gartner, global IT spending is expected to increase by 10% in 2026 compared to 2025, pushing the IT market to more than $6 trillion. This comes after a very strong 2025.

Spending on AI data centers has led the way, with the $500 billion data center market growing nearly 20%, a particular boon for Nvidia, the largest seller of AI chips. Gartner analyst John Lovelock said in a recent online presentation that these “very expensive” AI-optimized servers continue to be sold as fast as they can.

According to Gartner, North America accounts for half of the global spending on AI servers for data centers. Big AI builders like Alphabet, Amazon, Meta and Microsoft will account for two-thirds of the spending as they race to improve AI.

Sales of top AI systems are exploding as businesses and governments spend more money to access advanced AI tools from Google, OpenAI, Anthropic, Mistral AI, Databricks, Alibaba, and more. Gartner predicts that by 2029, spending on generative AI models will grow at a staggering 67% annually.

Spending on cloud computing, software and IT services will also remain strong. Software sales are increasing as vendors increase prices to account for new AI features in software used for analytics, sales, supply chain management, and more. Software vendors are feeling intense pressure to introduce AI capabilities. “It’s going to be an extinction-level event for software not to have generative AI capabilities in their products,” Lovelock said.

Smartphone and PC sales are experiencing strong growth as consumers and businesses seek new AI-enabled models that can run AI software directly on the device. There are also tailwinds in addition to AI, such as the shift from local servers to cloud computing, especially by small and medium-sized enterprises. Microsoft’s end of support for Windows 10 continues to spur businesses to update their PC fleets.

This level of spending will not be sustainable forever, Minton said in a recent online presentation on IDC’s projections. But he also sees no signs that the bubble is about to burst. However, current IT spending growth is somewhat cyclical, as AI spending boosts the overall economy, which helps businesses and boosts business confidence. This will drive business IT spending, including investments in AI.

Businesses have expressed some trepidation about spending more on IT, but with business technology spending expected to increase by 10%, it’s not putting pressure on budgets yet. Many companies are beginning to see AI as essential to competing. On the other hand, it is not possible to reduce large expenditures due to the necessity of IT such as cloud computing. Among the IT categories, the least affected by budget cuts are AI tools, software, and security.

Next year is likely to be a critical year for businesses competing to reap the benefits of AI, so here’s some business advice. Develop an AI policy that provides guidance to employees about what is and isn’t allowed and sets security and privacy rules. Break individual jobs into smaller tasks and see if AI can automate or enhance some of them.

Test your pilot project and evaluate it thoroughly. Encourage employees to test and use company-approved AI tools. Consider sharing short video tutorials on best practices. Try a free AI chatbot and leverage the AI ​​tools in the software your business is already using. Many companies initially focus on business productivity. AI can save time by summarizing meetings, emails, and reports. Or, brainstorming and data analysis can help employees make better use of their time and effort.