Global IT spending is forecast to grow by 9% in 2025, an improvement from the 8% in 2024, as artificial intelligence (AI) continues to spur data centre spending and enterprises renew investments in traditional hardware.
This is according to S&P Global’s Industry Credit Outlook 2025, which reveals IT demand is set to accelerate in the US, Latin America, EMEA, APAC and Canada, but is subject to US trade policy.
Software and IT services growth (including spending on the public cloud) will remain solid, while semiconductor growth will exceed the double-digit percent area due to AI tailwinds, it says.
“We forecast IT spending growth will improve to around 9% in 2025, versus 8% estimated for 2024, supported by a turnaround across the hardware segments, which will cascade to a continued strong semiconductor demand,” says Andrew Chang, analyst at S&P Global.
“Software sales will remain resilient, while IT services will grow meaningfully, partly due to ongoing public cloud migration.
“The global AI investment landscape is rapidly expanding, with spending projected to reach $630 billion by 2028, per IDC. Hyperscale data centres from Microsoft, Alphabet and Meta are increasing capital expenditures, while semiconductor makers like NVIDIA and TSMC lead the beneficiaries. Software companies are still exploring monetisation strategies, integrating AI into products and experimenting with revenue models as the industry evolves.”
S&P Global expects sustained AI investments throughout 2025, given industry comments regarding robust AI demand and hyperscalers’ announced capex plans, benefitting rated semiconductor and hardware issuers.
However, in the longer term, AI investments are expected to be volatile, it says.
“AI spending, while robust today, has the potential to turn the tech industry more volatile longer term, should AI-related revenue growth fail to meet expectations and hyperscalers ‘pause’ new infrastructure build-outs.”
According to BMIT’s latest research, the South African IT services market reached an estimated R104.9 billion at the end of 2024, and is projected to grow to R182 billion in 2028, amid soaring demand for cloud services.
Simmering uncertainty
S&P Global’s outlook incorporates a partial implementation of proposed Trump policies, including tariffs on China, but how these policies evolve will affect IT spending across the globe, it says.
The Chinese government’s recent stimulus measures to boost consumption pulls forward some demand and will lead to slower growth in smartphone and PC shipments in 2025, it notes.
“The semiconductor sector in China faces overcapacity due to new capacity additions and softening end-demand, although the government push to localise some tech supplies may alleviate the pressure.
“Large technology companies in the country will likely continue to spend on imported and domestic AI chip solutions for long-term competitiveness, after already significantly increasing their AI-related capital expenditure in 2024.”
Looking back
Despite global macro-economic and geopolitical uncertainties and cautious enterprise IT budgets, hyperscalers continued their relentless march toward building out their generative AI infrastructure last year.
S&P Global Ratings estimates capital spending by large data centre players (Microsoft, Alphabet and Meta Platforms) increased nearly 50% in 2024 to about $160 billion.
While these companies have yet to meaningfully monetise their AI investments, their cloud revenues still grew in excess of 20%, as enterprise customers continued their migration to the public cloud, keeping overall IT services growth near 7% in 2024.
Software spending, despite its perceived backseat to the AI build-out, remained resilient, growing near 9%, again reflecting the power of the recurring subscription model, although growth rates among smaller, sponsor-owned software providers were much lower.
The PC and smartphone industries finally turned the corner in 2024, after two years of a significant downturn.
“PC shipments grew just 1% but smartphone shipments rebounded nearly 6% due to pent-up demand after a two-year downturn. Global server shipments grew an estimated 7% in 2024, but industry revenues jumped more than 40% to nearly $200 billion, according to IDC, as the more expensive AI-enabled server shipments nearly doubled. We estimate hyperscalers now account for about 70% of total US server spending.”
The external storage market grew a modest 2% in 2024, while network equipment sales declined 11% after a strong 2023.
“Over the next few years, ongoing digital transformation initiatives, cloud migration and the continued refinement of hybrid work models will propel the industry. The integration of AI and machine learning into network management will be pivotal, enabling automation and operational efficiency,” says the study.
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