Nonstop AI Demand Fueling Cloud Infrastructure Spending

Those seemingly endless investments in artificial intelligence continue to translate into soaring cloud infrastructure demand. 

Research firm IDC has new numbers that show a 37% increase in spending on public and private cloud computing and storage for a total of $33 billion — and that’s just for the first quarter of 2024. Public cloud accounted for more than half (56%) of all infrastructure outlay, IDC said.

The driver? AI and its related deployments. These purchases “not only impact servers but also started to have positive influence on enterprise storage as well," said Juan Pablo Seminara, research director for IDC's Worldwide Enterprise Infrastructure Tracker, which features the firm’s latest numbers.

“Even though some caution still remains on the socio-political side, it has become clear that AI investment plans are not slowing down in 2024 and will continue growing at a high rate this year and beyond,” Seminara added. 

IDC's Juan Pablo Seminara

To be sure, the hyperscalers are not alone in rolling out all manner of AI-centric capabilities. Smaller providers, as well as system integrators, managed service providers, consultancies and other channel partners, also are helping end users to take advantage of AI, particularly generative AI. And, of course, the most effective and affordable AI tools require cloud computing as their foundation. That reality, combined with hopes for an improved global economy, have prompted IDC to forecast “a very positive” outlook for this year and next, with cloud spending expected to jump at a double-digit pace, per Seminara.

In just the first quarter, IDC said service providers — which, again, in the firm’s definition, include many channel partners — spent $32 billion on cloud infrastructure. That marked a nearly 38% increase from 2023 and accounted for almost 69% of the total market. In 2024 as a whole, IDC expects service providers to hand over $132 billion for cloud computing and storage. That’s a 26% increase over 2023. 

Meanwhile, non-service providers such as enterprises and government agencies ramped up their cloud infrastructure spending to the tune of about $15 billion in just the first quarter. That comes as little surprise given how rapidly these buyers are gobbling up AI resources to glean more insight into their operations, identify gaps in efficiency and promote innovation.

Indeed, for 2024, IDC predicts cloud infrastructure spending will grow 26% compared to 2023, hitting $138 billion. In contrast, outlay on non-cloud infrastructure will only rise 8% to about $65 billion. Public cloud infrastructure alone should experience a 30% year-over-year increase to $108 billion for the full year. Private cloud infrastructure will see a bit less demand, growing at almost 13% for a total of $30 billion in investment for the full year, according to IDC.

In terms of geography, every region except Latin America spent more on cloud infrastructure in the first quarter, IDC said. Even so, due to political tensions, buyers in Western Europe and the Middle East and Africa slowed their investments to the point that they showed only single-digit growth. Double-digit growth came in Asia Pacific, Japan and China (neither of which IDC considers part of Asia Pacific), Central and Eastern Europe, the United States and Canada. Most of the demand stemmed from the need for high-performance computing and AI-based projects. Some of those had been delayed due to pandemic-era supply issues, per IDC.

Overall, IDC is calling for a 14% compound annual growth rate around cloud infrastructure for the 2023-2028 period. The firm expects spending to reach nearly $214 billion in 2028, accounting for three-quarter of total compute and storage infrastructure spending. Not surprisingly, public cloud will make up the bulk of those figures, reaching a little more than $165 billion, according to IDC. Private cloud will take about a $48 billion share. And service provider spending (that includes consumption from the channel) will hit close to the $200 billion mark in 2028.