CTO Survey: AI budgets surge

The generative AI boom that began two years ago came at a difficult time for CTOs, as economic turmoil and industry-specific challenges forced high-growth companies to downsize their tech budgets. Those pressures have now eased, according to our latest CTO survey.  

With economic indicators and optimism rebounding, tech budgets have stabilized or begun to grow again. That’s allowed CTOs to invest in AI with more confidence, leading to a notable increase in spending in the technology. And while AI still represents a relatively small slice of companies’ overall tech budgets, that slice is expected to grow, as CTOs predict the AI spending surge will continue. 

Here’s what CTOs who responded to our second annual survey had to say about AI spending in 2024, and their outlook for 2025. As always, you can explore the full survey results, and filter by region, sector, and stage, via Sōzō Pulse.

It’s no surprise that investments in generative AI are growing. But the rate at which they are growing at a sizable number of companies is notable. Overall, 63% of CTOs said that their generative AI budgets grew in 2024 compared to 2023, and 24% said they doubled or more. Additionally, 31% of CTOs said those budgets grew by up to 99%, while 36% said they stayed flat. 

Armenak Mayalian, co-founder and CTO of Reflexivity, says he expected to see a big jump in generative AI spending, as it’s a new expense for many. “I’m very happy that more companies are implementing generative AI on a day-to-day basis, either in their product or processes,” he says. “AI is not new at Reflexivity, and has been there from day one. Our spending has increased over the past year as its capabilities expand, but it’s not as dramatic of an increase.”

For his part, Wil Bolivar, SoftBank Investment Advisers’ CTO, says the sharp growth aligns with what he has seen across the firm’s portfolio of roughly 470 companies around the globe. “You’ll continue to see this growth as the evolution of AI continues,” Bolivar adds. The sentiment is shared by CTOs, who are predicting the already strong rate of growth in AI spending will accelerate. Looking toward 2025, 85% said they expect their generative AI budgets to increase, and 37% said they expect that increase would be greater than 100%.  

Despite that momentum, CTOs’ other priorities continue to dominate overall tech budgets: 57% said generative AI represents 5% or less of their total spending; another 21% said it represents between 6% and 10%; and 22% of CTOs said it amounts to 11% or more. 

Merve Hickok, founder of AIethicist.org, says the numbers reflect both the enthusiasm generated by AI and the complexity of implementing the technology effectively. “Generative AI requires significant and long-term investment in terms of data, talent, technology stack, computing, and overall governance,” she says. “Many corporations are using their budget to pilot use cases to verify or validate if they will actually get the cost reductions and efficiencies.” 

Ultimately, Bolivar predicts that investment in generative AI will keep growing, despite the technology’s significant cost. 

“It’s like the internet,” he says. “It was very expensive initially, but costs came down once competition came in. The same will happen here, especially as demand continues to increase.” Even so, trying to predict how and by how much is difficult at this stage. “Who knows what else might emerge?” he asks. “This kind of revolutionary mindset and technology, the kind that redefines the industry every 20 years, opens up new ways of thinking and makes you wonder — what other possibilities lie ahead?”

Mayalian encourages everyone to explore generative AI. “Try it. Use it. See if it can help you. Leverage AI and large language models wherever you can.” 

The explosive growth in generative AI is happening amid technology budgets that are rebounding, after declining in recent years. In our 2023 survey, 37% of CTOs told us their budgets were shrinking, whereas this year just 20% said so. Further, 23% of last year’s respondents said their budgets shrank by a quarter or more from the year before; this year, just 10% of CTOs said their budgets suffered such declines. In contrast, 36% of CTOs said their budgets grew in 2024 from the previous year, compared with just 30% who said so last year. 

Bolivar says the rebounding tech budgets are intrinsically tied into AI. “AI is forcing you to pay a little bit more for some of the tooling,” he said. 

Mayalian agrees: “You have to spend more on technology in order to make sure that the use of generative AI is prudent. And that includes considering the best way of adapting your way of working.” As companies define what they want to use generative AI for, and how, “that requires additional budget.” 

But Bolivar says the scale of AI spending at companies will hinge on how they decide to deploy the technology. “It depends on whether you want to write your own AI bots, or if you want to use external AIs,” he says. Those in the former group are likely to be the biggest spenders. “That’s for the storage, the computing, everything needed in order to make those engines work,” he adds.

Hickok says that as companies work to balance cost with ROI, many will gravitate toward using third-party solutions: “Unless you have the in-house talent to build upon open source models for your organization’s specific domain or use case, you’re going to be dependent on commercially available general purpose systems,” she says.

For many companies, she adds, the large investment required to have a functioning generative AI solution might not justify the costs to adopt it — at least not yet. “While general purpose AI models might perform well across high-level questions,” she says, “you need more specific domain and organizational knowledge to complement these systems if you’re going to have large scale adoptions.” That means that the models need to be highly capable of replacing your current processes, “and not put you in more risk through hallucinations, copyright infringement, and data protection issues.”