AI Is Putting Pressure on the Corporate IT Budget

Good morning. When research and advisory firm Gartner released its latest forecast last month, it projected that global IT spending is expected to reach $6.37 trillion in 2026, up 14.2% from 2025.

Such growth reflects the historic level of spending on AI infrastructure across the board. But if you dig a little deeper on the enterprise IT spending side, a more mixed picture emerges.

“Despite the strong growth in spending, this is not a ‘rising tide lifts all boats’ market trend,” Gartner Chief Forecaster John-David Lovelock said about the report. “Technology budgets are being strained by inflation, supply shortages, rising hardware and memory costs, AI funding initiatives and shifting priorities.”

Indeed, tech leaders already have begun sounding the alarm on rising AI token costs, and many are well past the pilot phase of AI, where initiatives were funded for the sake of experimentation.

To make better sense of the numbers, I asked chief information officers what they thought of Gartner’s IT spending forecast, and how their own AI and tech budgets are shaping up.

Mike Trkay, CIO and chief customer officer of analytics software company FICO, said that while Gartner’s projection appears expansive, overall enterprise budgets remain tightly constrained.

“Organizations are making difficult trade-offs,” Trkay told me. “IT leaders are actively cutting costs in traditional services and routine hardware refreshes to fund the massive processing requirements of AI, particularly infrastructure and data foundation work.”

When it comes to tracking AI spending on the corporate budget, Trkay said the technology is no longer a separate line item. Instead, it is woven into multiple lines across the IT budget.

Yet the bigger problem is what Trkay described as an “AI ROI paradox.” Even while AI budgets are being funded aggressively, leaders can’t yet draw a straight line to the bottom line, meaning ROI hasn’t caught up to investment, he said.

The issue of measuring AI’s ROI has been a persistent challenge for IT leaders, even nearly four years into the AI boom. Now, as AI agents become more widely adopted, it remains a matter of debate whether the technology’s ROI can be clearly calculated.

To Mike Kempe, CIO of audit and consulting firm Grant Thornton, the Gartner report comes as no surprise—but with one caveat.

“It’s clear that technology spending is still growing, but I don’t think companies are spending more simply for the sake of spending more,” Kempe told me. “The conversations I’m having with clients, fellow CIOs, boards and others is much less about whether they should invest in AI and much more about where they’ll get the biggest return.”

So what exactly are those areas? They’re certainly not flashy, according to Kempe, and typically involve projects that automate manual processes or help people make decisions faster in departments like finance, risk, operations and client service.

“I strongly believe that we are moving beyond the phase where companies measure success by how much they spend on AI. The focus now is on how quickly they can turn those investments into real business value,” Kempe added.

Sastry Durvasula, chief operating officer of TIAA, said the financial services organization is directing resources toward the areas where Gartner shows growth accelerating, including AI-optimized infrastructure, cloud platforms and intelligent software.

“We are four years into our AI journey and well past experimentation,” Durvasula told me. “We have deployed dozens of production use cases across operations, client engagement, and shared services.”

Durvasula said TIAA is primarily focused on AI-powered fraud prevention and cybersecurity, and redesigning how employees get work done with AI across the enterprise.

“Gartner’s own analysts note this is not a rising tide that lifts all boats,” Durvasula added. “The organizations that will lead are those with mission alignment, governance discipline and the operational focus to move from pilots to measurable outcomes.”

Are you feeling the budgetary pressures that Gartner identifies? Send your feedback to me at belle.lin@wsj.com (if you’re reading this in your inbox, you can just hit reply).

Nvidia announced an expanded partnership with Amazon Web Services, Amazon’s cloud unit, on Wednesday, The Wall Street Journal reported.

AWS is deploying an additional two million GPUs starting this quarter through the second of fiscal 2029, according to Nvidia CFO Colette Kress, speaking on a conference call after the chip giant’s earnings report that afternoon.

The companies also plan to deepen their work together across AI factories, CPUs, networking, open models, data processing and robotics, they said in a press release.

Elsewhere in Nvidia news:

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Follow Isabelle Bousquette on LinkedIn, Instagram, X, and TikTok for more behind the scenes on her tech and AI coverage, and lately, her contributions to the WSJ Leadership Institute’s new Executive Resilience series, where she’s profiling America’s top execs about their fitness and wellness habits.

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