As industries around the globe continue to pivot toward digital transformation, the technology sector is set for another year of impressive growth.
According to S&P Global Ratings, global IT spending is expected to grow by 9% in 2025, driven by an unprecedented demand for artificial intelligence (AI) technologies and robust investments in hardware, including data centers and semiconductors.
AI Demand Powers Data Centers and Hardware Investments
AI is driving a seismic shift in IT spending, and its role as a catalyst cannot be overstated. Andrew Chang, Technology Director at S&P Global Ratings, points out that industries from healthcare to energy are pouring resources into AI to boost R&D, sales, and operational efficiency.
The demand for AI has sparked a nearly 50% increase in capital expenditures for data centers by tech giants like Microsoft, Alphabet, and Meta Platforms. These companies are set to push AI-related spending to nearly $160 billion in 2024.
And the growth isn’t stopping at software. Traditional hardware investments, especially in semiconductors, are also surging, with a projected 12% growth in 2025. It’s clear: AI is reshaping the tech landscape at a pace we’ve never seen before..
The strong demand for AI compute capabilities is one of the key drivers, coupled with a rebound in demand for non-AI-related hardware.
Diversification Amid Geopolitical Tensions
Despite the optimistic forecast, several risks loom over the tech industry, particularly related to the ongoing geopolitical tensions between the United States and China.
Any deterioration in relations between these nations, or disruptions to the global supply chain, could significantly impact IT consumption, especially in hardware markets.
China remains a dominant player in the global supply chain, and any disruptions there could cause substantial volatility in the tech sector.
In response to these risks, tech companies are increasingly diversifying their supply chains, but the industry remains heavily dependent on China, a factor that could complicate growth in the coming years.
Additionally, regulatory concerns—particularly around cybersecurity—are expected to continue shaping the investment landscape, with stricter regulations pushing companies to invest in more secure and resilient IT infrastructures.
Cloud and AI-Driven Growth Across Multiple Sectors
The cloud services market remains a key contributor to the technology sector’s growth. With cloud revenues growing over 20% in 2024 and IT services expanding by nearly 7%, this trend is set to continue into 2025.
The increasing integration of AI technologies into cloud platforms is expected to fuel additional growth, as businesses seek scalable, on-demand resources for everything from data analysis to application deployment.
Hyperscalers—the tech giants that manage massive cloud infrastructure—are forecast to experience revenue growth well above 20%, as their investments in AI and cloud-based offerings begin to pay dividends.
Hardware and Software: A Positive Outlook for 2025
While AI and cloud are the focal points of growth, the broader IT sector is also poised for gains. Software spending is projected to accelerate modestly in 2025, with a 10% growth rate driven by increased digital transformation and AI integration.
Meanwhile, hardware markets, particularly for servers and mobile telecom equipment, are expected to see material improvements, with server shipments set to grow by 4% and revenues potentially rising by 10% to 20%.
PC and smartphone shipments are expected to rebound with growth rates of 2% to 3%, but the revenue picture looks even better. The gradual introduction of AI-enabled devices is anticipated to drive higher-than-expected revenue growth in these traditionally mature sectors.
Regional Breakdown of Tech Spending Forecasts for 2025
As global IT spending rises, each region is expected to experience unique growth patterns. Here’s a look at the projected IT spending trends across different regions:
- Europe: IT spending in Europe is forecast to reach $1.28 trillion in 2025, marking an 8.7% increase. This is the highest growth rate since the post-pandemic surge in 2021.
- Middle East and North Africa (MENA): In MENA, IT spending is set to grow by 4.2%, reaching $175.5 billion in 2025, according to Gartner experts.
- Australia: Australia’s IT spending is expected to surge by 8.7%, driven by AI, cybersecurity needs, and hardware upgrades as support for Windows 10 ends.
- Latin America: IT spending in Latin America is projected to grow between 7% and 9%, fueled by digital transformation and increased investments in cloud computing.
- Southeast Asia: Southeast Asia stands out with a 7% rise in IT spending across Indonesia, Thailand, Vietnam, the Philippines, and Malaysia, expected to total nearly $47 billion.
Gartner experts predict a 14% increase in IT software spending and a 9.4% growth in IT services. Additionally, IDC forecasts global AI spending will exceed $200 billion in 2025.
A New Growth Era? In the coming year, CIOs are shifting their focus from cost-efficiency to growth, as they are now authorised to invest more. John-David Lovelock, VP Analyst at Gartner, noted in a recent webinar: “Growth is now the top thing on CEOs’ minds.”
According to Gartner leaders are prioritising automation to accelerate growth, with cloud emailing and authoring expected to grow by 23.4% in 2025,
Worldwide IT Spending Forecast (Millions of U.S. Dollars) Source: Gartner, October 2024
| 2024 Spending | 2024 Growth (%) | 2025 Spending | 2025 Growth (%) | |
|---|---|---|---|---|
| Data Center Systems | 318,008 | 34.7 | 367,171 | 15.5 |
| Devices | 735,764 | 6.2 | 805,722 | 9.5 |
| Software | 1,087,800 | 11.7 | 1,239,779 | 14.0 |
| IT Services | 1,587,913 | 5.6 | 1,737,754 | 9.4 |
| Communications Services | 1,530,299 | 2.0 | 1,596,890 | 4.4 |
| Overall IT | 5,259,784 | 7.2 | 5,747,317 | 9.3 |
Digital Transformation Spending Set to Soar: A $4 Trillion Future by 2027
The race to modernize is on, and by 2027, global spending on digital transformation is expected to approach a staggering $4 trillion, growing at a rapid 16.2% compound annual growth rate (CAGR).
The surge reflects the increasing urgency businesses face to modernise operations and stay agile in an ever-evolving digital landscape..
Here’s a glimpse into the innovations set to dominate across industries in 2025:
- Retail: Retailers are blending physical and digital experiences, deploying smart inventory systems and augmented reality (AR) to create immersive in-store experiences that enhance customer engagement.
- Healthcare: Hospitals are diving into digital health platforms and AI-driven diagnostics, a game-changer in improving both patient outcomes and operational efficiency.
- Manufacturing: Manufacturers will harness the power of predictive maintenance and supply chain analytics, turning real-time insights into a competitive advantage.
As organisations refine their digital strategies, the focus will shift toward aligning technology with broader business goals. It’s clear: the future is digital, and the transformation is happening faster than ever.
The Road Ahead: Volatility and Long-Term Potential
As the tech sector gears up for a strong 2025, it’s crucial to keep an eye on the potential bumps in the road.
The rapid pace of AI development, particularly in data centers and cloud services, could spark fluctuations in market demand as companies recalibrate their strategies and investments.
The geopolitical and regulatory landscape will also be a significant factor, with U.S. trade policies and cybersecurity regulations shaping the way businesses allocate resources and navigate risks.
Still, S&P Global Ratings remains optimistic about the long-term future of the industry. With AI, cloud computing, and hardware investments continuing to rise, the tech sector is expected to become more resilient, moving away from its traditional cyclical patterns.
As Andrew Chang notes, “We maintain a positive long-term view of the technology industry,” underscoring the transformative potential of AI and the ongoing digital revolution.”
“While risks persist, the tech sector’s future remains bright, with AI, cloud services, and hardware investments at the forefront of global IT spending in 2025 and beyond,” he said.
The global IT sector is set for strong growth in 2025, driven by AI and cloud technologies, despite potential risks from geopolitics and regulation.
