An already booming AI market is poised for further expansion as cloud providers, AI model makers and software companies continue to invest hundreds of billions of dollars in the technology.
Worldwide AI spending is expected to grow 44% year over year to $2.52 trillion in 2026, according to a Gartner report published Thursday. The analyst firm added roughly $500 billion to its September forecast, which estimated the market would settle in at just over $2 trillion this year, after shooting up nearly 50% from 2024 to 2025.
Infrastructure will account for the lion’s share of the market, consuming more than half of AI spend in 2026, just as it did last year, when investments in data centers, servers and other hardware components totaled nearly $1.8 trillion. AI services, the category where the bulk of enterprise spend resides, will remain the second largest bucket, growing 40% year over year to capture $588 million in revenue.
Just a little over three years since OpenAI unleashed ChatGPT, roughly half of all software sold will include a generative AI component as agentic automation spreads across the industry, Gartner Distinguished VP Analyst John-David Lovelock told Channel Dive.
“The speed of AI is breaking things — breaking market norms,” Lovelock said.
Despite AI’s rapid proliferation and steep growth curve, many organizations are stalled in the early stages of adoption, facing governance, security and workforce preparedness challenges.
Use of AI agents declined during the second half of last year, according to an Accenture report published earlier this week. More than half of the 3,350 employees surveyed at organizations using the technology experienced productivity losses tied to low quality and misleading AI outputs, Accenture found.
A gap between outcomes and expectations has opened on the agentic front. While more than 7 in 10 organizations deployed AI agents last year, only 11% of use cases moved into production, Camunda found in a study published Thursday. The process orchestration platform provider commissioned Coleman Parks to survey 1,150 senior IT decision makers in September and October.
“Exercising caution with agentic AI means many organizations can’t move beyond pilots or isolated use cases,” Kurt Petersen, SVP of customer Success at Camunda, said in a release accompanying the report.
Adoption efforts have also clashed against a lack tangible returns on AI investments.
“As far as expectations for AI goes, they won't get lower than they are this year,” Lovelock said.
Generative AI traversed its peak of inflated expectations stage in Gartner’s hype cycle over the last two years and is now mired in a trough of disillusionment, Lovelock noted in the report.
Rather than investing in “moonshot projects” with questionable ROI potential, enterprises will primarily purchase AI through their incumbent software provider in the months ahead, he said.
Spending on AI software, a category that includes generative AI chatbots and autonomous agents, is expected to increase nearly 60% year over year to $452 billion in 2026.
An acquisitive environment
Rapid growth coupled with subdued enterprise enthusiasm feeds an environment conducive to consolidation, according to Lovelock.
“When these two things coincide, it generally means that point solution providers get acquired by solution providers, solution providers get acquired by suite providers, suite providers get acquired by platform providers, and then platform providers start to look for better partnership arrangements,” Lovelock said.
In the last month, Microsoft added agentic AI data engineering platform Osmos to its cloud portfolio, Meta purchased AI agent startup Manus and Snowflake signed an agreement to acquire AI observability platform Observe.
GPU giant Nvidia entered into a non-exclusive licensing agreement with AI inferencing chipmaker Groq to secure access to the startup’s technology and talent. The deal cost Nvidia roughly $20 billion, according to a CNBC report.
The transaction was indicative of where the market and the money is headed, according to Lovelock.
“We're going to see companies being bought for technology that's pre-revenue,” said Lovelock. “We're going to see companies being bought just for the customers that they're already in front of and just for the talent that they have.”
As Nvidia’s quarterly revenue neared $60 billion in September, the company said it would invest up to $100 billion in OpenAI as part of an AI compute partnership. The company poured $5 billion into CPU provider Intel just weeks before the OpenAI deal was announced.
The size, scope and speed of the spending stoked fears of a potential AI bubble in October, as economists saw investments in the technology outpace near-term revenues.
Lovelock is more sanguine about AI’s revenue-generating potential, although he does anticipate some vendor volatility this year.
“I can't answer if there's a stock market problem, but I do know that there's not a problem with the revenue that's going to flow into AI,” Lovelock said.
There are, however, more AI providers than are likely to survive into 2027, when Gartner expects global AI spending to grow another 30% and surpass $3 trillion.
“This year we’ll have a consolidation, and we’ll have companies that don't make it — that’s a normal part of a new technology’s lifecycle,” Lovelock said. “The market won’t support the hundreds of players that there are now. We’ve had a thousand flowers bloom and now it’s time to prune the garden.”
