S&P Global forecasts a 9% rise in IT spending for 2025

S&P Global Ratings has forecasted a 9% growth in global IT spending for 2025.

The anticipated increase is mainly attributed to the influence of artificial intelligence (AI) driving significant investments in data centres and a renewed focus on traditional hardware within enterprises. Andrew Chang, Technology Director at S&P Global Ratings, commented, "We maintain a positive long-term view of the technology industry. Industries from health care to energy will increase their investments in IT, and AI in particular, to increase sales, hasten R&D, and achieve operational efficiency."

The report highlights steady growth in software and IT services, while semiconductors are expected to see double-digit growth propelled by AI. It also noted the potential risk posed by U.S. tariffs, which could affect IT consumption significantly, especially in consumer-focused and enterprise hardware sectors.

In 2024, AI investments saw a substantial increase, with major data centre players like Microsoft, Alphabet, and Meta Platforms raising their capital spending by nearly 50% to about USD $160 billion. Additionally, cloud revenues grew by more than 20%, while growth in IT services was close to 7%. Meanwhile, PC and smartphone shipments showed a recovery, and global server shipments increased by 7%, although industry revenues rose over 40% to nearly USD $200 billion.

Hyperscalers have become prominent players, now accounting for approximately 70% of total U.S. server spending. This trend is expected to continue, with the sector anticipating strong revenue growth above 20%, supported by the gradual monetisation of AI investments. The report forecasts a 10% growth in software driven by digital transformation and AI integration, and a significant improvement in expenditure on hardware as enterprises transition more significantly to cloud-based solutions and invest in Generative AI projects.

Semiconductors are projected to grow at nearly 12%, outpacing the overall IT industry due to increased adoption of AI compute and a resurgence in non-AI-related demand. Network equipment is expected to recover with a 7% revenue growth after experiencing a downturn in 2024.

There is also a modest growth forecast for mobile telecom equipment following declines in the previous years, with a gradual recovery in the storage sector leading to a 4% revenue increase. Additionally, shipments of PCs and smartphones are expected to grow by 2%-3%, with projected industry revenues rising due to the integration of AI-enabled devices. Server shipments are also expected to increase by 4%, with revenues anticipated to rise between 10% and 20%.

The report identifies potential risks such as the deterioration of U.S.-China trade relations, which could lead to disruptions in the global supply chain and impact overall global IT consumption. On the other hand, there is optimism in the continued strong growth of AI investments, albeit with potential volatility beyond 2025. Stricter cybersecurity regulations are also noted as a driver for increased IT investments.

"Despite geopolitical uncertainties, the tech sector is poised for robust growth, with AI and cloud services leading the charge," the report concludes. It maintains a positive long-term perspective of the technology industry, anticipating it to become less cyclical with increased sector investments. AI and cloud services are identified as the key drivers, with as-a-service spending becoming more widespread.