AI's Trough of Disillusionment: A Chance for Smarter Spending

Worldwide AI spending is projected to reach $2.52 trillion in 2026, yet many generative AI projects are currently in Gartner's "Trough of Disillusionment," failing to deliver expected returns. This phase, characterized by waning interest, presents an opportunity for businesses to re-evaluate their AI investments and focus on practical outcomes.

Experts like John-David Lovelock from Gartner advocate for a more grounded approach. He suggests that AI "slipping into the ditch" allows for careful consideration of investments, moving away from "moonshot projects" that often fail. Indeed, MIT research indicates 95% of generative AI projects do not deliver value.

Through 2026, Gartner identifies three crucial areas for AI investment: capacity building, strong partnerships, and co-development. This includes significant build-outs of AI infrastructure, such as AI-optimized servers and data centers, which will add $401 billion in spending by 2026.

Building strong relationships with technology providers is paramount. Companies should assess how providers' capacity-building approaches align with their resources and priorities. Focusing on established partner stacks and co-development, where provider rewards are tied to client outcomes, can significantly improve AI ROI.

Success in AI relies on focusing on defined business outcomes, leveraging partner capabilities, and ensuring internal stakeholder buy-in. Value-based or outcome-based pricing models, and especially co-development, foster deeper, more rewarding relationships between organizations and their technology suppliers.