AI Spending Is a Boom, Not a Bubble

Key Findings

• AI spending will reach $1.48 trillion in 2025,representing 49.7% year-over-year growth (Gartner)
• Current investment exceeds the 1990s internet boomin both pace and scale, with more durable infrastructure
• AI now drives over 30% of data center spending, up from 22.6% just one year ago (IDC)
• Enterprise AI budgets average 36% of technology investments,with overall tech budgets rising from 8% to 14% of revenue (Deloitte)
• Companies delaying adoption risk obsolescence,as competitive advantages compound for early movers

Gartner says that AI spending will reach $1.48 trillion in 2025—a 49.7% increase that outpaces the explosive growth of the 1990s internet boom. But is this sustainable investment or dangerous speculation?

Before joining QuaerisAI and the AI industry, I spent time researching this question. With three decades in the technology industry spanning everything from mainframe hardware, ERP solutions, ETL, dynamic reporting and advanced analytics; I’ve learned from experience the importance of doing your homework to distinguish transformational technologies from the latest fads.

After analyzing reports from Gartner, McKinsey, Deloitte, and the Federal Reserve among others, the conclusion is clear that AI represents a structural economic transformation, not a speculative bubble. Here's how the data convinced me:

The Numbers: AI Spending Outpaces Previous IT Boom

• $1.48 Trillion 2025 AI Spending +49.7% YOY (Gartner)
• $2 Trillion2026 Projected AI Spending (Gartner)
• 36% AI Spending as a Share of Tech Budgets (Deloitte)
• 30%+Increase in Data Center Spending YOY (IDC)

As shared above, Gartner predicts that worldwide AI spending is on track to surpass $2 trillion by 2026. But raw numbers alone don't tell the full story. What matters is whether this spending is building genuine value or inflating an unsustainable bubble.

How This Spending Compares to the 1990’s Internet Expansion

Haver Analytics' recent analysis draws direct parallels between today's AI investment surge and the 1990s internet expansion. Their analysis shows that digital investment in the U.S. is now on pace or exceeding that earlier era's momentum and that AI spending has a long time line to run.

The Richmond Federal Reserve goes further when comparing AI infrastructure spending to the telecommunications construction boom of the late 1990s. They found that data center investment has already surpassed inflation-adjusted telecom buildouts, and it's accelerating faster.

Boom vs. Bubble: What the Indicators Show

The primary difference between a boom and a bubble comes down to whether investments create durable value or speculative excess. Here's how current AI spending measures up:

"AI demand is structurally transformative, akin to the start of the internet era rather than a speculative craze." — Jensen Huang, Nvidia CEO

What Leading Analysts Say

The consensus among credible research firms is remarkably consistent:

McKinsey: AI as the Top Digital Productivity Driver

McKinsey's 2025 Technology Trends Outlook evaluated 13 major technology trends and found AI-enabled automation continues as the top driver of digital productivity growth. They project billions in annual value creation across manufacturing, healthcare, and professional services.

Deloitte: AI Dominates Enterprise Budgets

Deloitte's 2025 Tech Value Survey found that AI and generative AI account for the largest single share of digital budgets, comprising roughly 36% of organizations' technology investments on average. Technology budgets overall are rising from 8% of revenue in 2024 to 14% in 2025, with AI absorbing much of that growth.

Harvard Business Review: The Risk of Inaction

In their October 2024 article "Is AI a Boom or a Bubble?", Harvard Business Review warned:
"To ignore AI is to risk obsolescence. Success will come from disciplined adoption and pragmatic corporate governance. Leaders who focus on embedding AI into workflows and cultivating a workforce able to adapt will capture durable value."

Federal Reserve: Durable Infrastructure Investment

The Richmond Federal Reserve's analysis concluded that today's AI investments represent durable economic value in energy capacity, data center infrastructure, and computational hardware and not speculative excess.

Why This Is Different: Infrastructure Tells the Story

The clearest signal that AI is a boom rather than a bubble lies in what's being built:

• Data centers: Physical facilities requiring massive capital investment and years to construct
• Semiconductor fabs:Multi-billion dollar manufacturing plants with 3-5 year lead times
• Energy infrastructure: Power plants and grid capacity to support computational demand
• Network infrastructure: High-speed connectivity to move massive data volumes

These aren't speculative website domains or vaporware products. They're tangible assets that will retain value regardless of market sentiment shifts.

As Sam Altman noted in a recent Stratechery interview: "It's brutally difficult to have enough infrastructure in place to serve the demand." This is the opposite of a bubble—it's a supply constraint in the face of genuine demand.

What This Means for Enterprise Leaders

The Time To Act Is Now

• Early adopters are already pulling ahead: Companies embedding AI into workflows are seeing 20-40% productivity gains in specific functions
• "Wait and see" is increasingly risky:As AI becomes standard in industries, non-adopters face growing competitive disadvantages
• Costs will only increase: Demand for computational resources, AI talent, and implementation expertise are increasing and driving prices up
• The fast-follower window is narrowing:Network effects and data advantages compound over time

How to Invest Wisely in AI

The data shows AI is durable, but that doesn't mean every AI investment makes sense. Here's how to approach AI adoption strategically:

• Start with High-ROI Use Cases

  Focus on applications with clear, measurable business impact. For example, use Natural Language Query systems for data access to deliver immediate value by eliminating reporting bottlenecks and enabling self-service analytics.

• Build Infrastructure Incrementally

  Start with cloud-based AI services and scale as you prove value and understand your computational needs.

• Prioritize Workforce Readiness

  Technology is only valuable if people can use it. Invest in training, change management, and creating a culture that embraces AI-augmented work.

• Avoid Vanity Projects

  Not every AI application is worth pursuing. Resist the urge to "do AI" just to say you're doing it. Focus ruthlessly on business outcomes.

• Think Integration, Not Replacement

  The highest ROI AI implementations augment human capabilities rather than attempting to replace entire job functions. Look for opportunities where AI removes friction from existing workflows.

Frequently Asked Questions

Is AI spending sustainable or is it a bubble?

AI spending represents sustainable growth, not a bubble. Unlike speculative investments, AI spending is building durable infrastructure (data centers, computational hardware, energy capacity) that creates tangible economic value. Analysis from the Federal Reserve shows AI infrastructure investment has already surpassed inflation-adjusted telecom buildouts from the 1990s.

How much will companies spend on AI in 2025?

Gartner projects worldwide AI spending will reach $1.48 trillion in 2025, representing a 49.7% increase from 2024. This spending is on track to surpass $2 trillion by 2026. AI now drives over 30% of all data center spending, up from 22.6% just one year ago

How does current AI investment compare to the 1990s internet boom?

Current AI investment exceeds the 1990s internet boom in both pace and scale. According to Haver Analytics, digital investment is now matching or exceeding the momentum of the 1990s internet expansion. However, AI investments are building more durable physical infrastructure, making them structurally different from the dot-com speculation.

What percentage of IT budgets should companies allocate to AI?

Deloitte's 2025 Tech Value Survey found that AI and generative AI account for approximately 36% of organizations' technology investments on average. Technology budgets overall are rising from 8% of revenue in 2024 to 14% in 2025, with AI absorbing much of that growth.

What happens to companies that delay AI adoption?

Harvard Business Review warns that companies delaying AI adoption risk obsolescence. Early adopters are already gaining competitive advantages through improved productivity, better decision-making, and operational efficiency. The window for being a fast-follower is closing as AI becomes embedded in standard business workflows.

My Decision: Why I Joined QuaerisAI and the AI Industry

After reviewing the evidence I reached the clear conclusion that AI is transformational for businesses and I had the opportunity of joining the forefront of a revolution.

The consensus of credible analysts pointed to the reality that while today's AI investments resemble historic booms in their scale and scope, the underlying asset base represents durable economic value. This is less an "AI Bubble" than a structural digital transformation phase, similar in spirit to the 1990s internet revolution, but even greater in scale and built on more solid fundamentals.

For companies like QuaerisAI that help enterprises harness AI value, this shift means AI investments are no longer science experiments at the margins of IT budgets. They're becoming the center of digital transformation strategies.

So, to me, the question isn't whether AI investment represents a Boom. The data shows that clearly it is. The question is whether your organization will be positioned to capture the value it represents or risk being left behind while competitors pull ahead.

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Contact Kurt Shaffer at kurt.shaffer@quaeris.ai

About the Author

Kurt Shaffer is an executive at QuaerisAI with over three decades of experience in data and analytics. His career has spanned optical data storage, mainframe hardware, ERP solutions, ETL, dynamic reporting and advanced analytics giving him a unique perspective on identifying truly transformational technologies.

Have thoughts on AI investment trends or would like to learn more about QuaerisAI? Kurt welcomes discussion at kurt.shaffer@quaeris.ai