The global market for generative artificial intelligence (GenAI) models is anticipated to grow by 149.8% in 2025 to exceed USD $14 billion, with significant expansion also forecast for AI-optimised servers and AI-enabled computing devices, according to a new report by Gartner.

Gartner’s analysis indicates that the rapid evolution of GenAI capabilities is prompting technology vendors to reconsider every aspect of their competitive strategies. The industry is now characterised by overlapping competitions across the AI technology stack, including infrastructure, models, applications, and services.

Competitive landscape

According to Gartner, the established approach of building provider-enterprise value relationships will no longer be sufficient to drive adoption of AI solutions. Success in the current environment requires a deeper and more dynamic understanding of client needs and competitive positioning.

Anthony Bradley, Group Vice President at Gartner, summarised the ongoing transformation:

“The AI vendor race is not a single race with a clear finish line, but rather a series of overlapping competitions, where the end game can range from market leadership to technological breakthroughs, or simply maintaining relevance.”

The report highlights that the landscape is shifting rapidly and that GenAI advantages are dissipating much faster than in previous cycles of technological innovation. Gartner predicts that within 36 months, offering GenAI capabilities will become a baseline requirement across much of the technology sector. In software especially, the window for first-mover advantage has already closed, with Gartner forecasting that by 2026 more spending will be allocated to software incorporating GenAI functionalities than to software without them.

Growth forecasts

The GenAI models market is set for a significant leap, with projections pointing to a 149.8% growth rate in 2025 and a total market size in excess of USD $14 billion. By 2028, Gartner expects this market to stabilise at a 38% annual growth rate, attributable to GenAI becoming increasingly embedded in applications across industries. Concurrently, the market for AI-optimised servers is projected to rise by 90.9% in 2025, while by 2027 nearly all premium computing devices are expected to be AI-enabled.

Strategic shifts

Bradley outlined the necessary strategic shift tech vendors will need to embrace to remain competitive, saying:

“Vendors must pay close attention to the frequent shifts in the market to gain advantage and protect their position. It requires an understanding of competitor capabilities and their demonstrated and likely moves in the race. Vendors must also have a deep understanding of AI adoption behaviours and how they’re positioned in the race against competitors to meet or even drive demand.”

The report identifies a particular challenge in delivering on the promised business value of GenAI projects. Less than 20% of such projects are expected to achieve their intended business objectives by 2026, which Gartner attributes to a disconnect between technical deployment and delivering meaningful outcomes to customers.

Bradley advised,

“Providers must pivot from functional, use-case-oriented AI to approaches that deliver real business outcomes tied to mission-critical initiatives. Less than one in five GenAI projects will achieve their desired business value through 2026. To close this gap, product leaders need to integrate targeted business outcomes into product engineering, marketing, and implementation. Those who fail to make this shift will not remain competitive.”

Industry implications

Gartner’s findings underline the accelerated pace at which GenAI is becoming a baseline expectation rather than an innovation differentiator across the industry. Vendors are now compelled to focus not only on technological advancement, but also on the integration of business value and adaptability to ongoing market shifts.

The report concludes that tech providers will need to actively monitor competitor moves, customer adoption patterns, and the evolving suite of expectations around GenAI as the sector matures over the coming years.