AI is eating up companies' tech spending budgets, most of which goes to employee adoption – NBC Connecticut

• High interest rates are forcing some companies to pull back on technology spending, with AI and cloud driving “significant” new investments, according to a new survey from the CNBC Technology Executive Council.
• Nearly four times as many companies said they are allocating their AI budgets to employee-facing tools, such as the new Microsoft Copilot suite, rather than customer-facing apps like gen AI services or sales chatbots.
• HPE and Nvidia announced a deal this week to deploy AI in the enterprise, which HPE's CEO says can be deployed in under 30 seconds.

While high interest rates are hurting technology spending budgets across the market, the critical importance of artificial intelligence and cloud computing to the future of businesses across all sectors is driving current spending, according to a new semi-annual survey by the CNBC Technology Executive Council. Of companies spending on AI, nearly four times as many are investing in employee-facing AI projects rather than customer-facing apps, the survey also found.

Sixty percent of a select group of companies surveyed said generative AI is critical to their business, and for 44% of companies, artificial intelligence is the largest item in their technology spending budget for next year. Sixty percent of survey respondents said their company's new AI investments are “accelerating.”

While IT spending budgets are battling lingering fears of an economic slowdown that has yet to materialize, the need to invest in modern customer-facing applications is driving many companies forward. Meeting customer demand for new technology is the biggest risk tech executives see for their companies' near future, cited by 28% in the survey, followed by pressure to reduce costs at 20%. The need to find talented employees has dropped dramatically from the top risk cited by 26% of tech executives a year ago to now being cited by only 4% of survey respondents.

“There's no doubt that spending on AI will strain other parts of the budget,” Pure Storage CEO Charles Giancarlo recently told CNBC, explaining that many companies are still in the process of sorting through all of their internal data in preparation for integrating AI. Sorting through the massive amounts of data already stored within companies could take years.

Accenture CEO Julie Sweet said in an interview with CNBC on Thursday that the consulting firm has booked $2 billion in generative AI bookings so far this year, up from $300 million last year. “I feel like a lot of the generative AI spending today is about prioritizing spend. Clients are focused on transforming with technology, data and AI, and what's driving our revenue is AI readiness. You have to build a digital core. If you don't have access to data, you can't leverage AI, so a lot of the modern platforms are being deployed,” Sweet said.

After NVIDIA became the market's most valuable company this week, Bank of America said the AI ​​generation is only in year two of a three-to-five year deployment cycle and expects hardware demand to triple to $300 billion from $100 billion this year, with 80% of that going to NVIDIA. Vivek Arya, senior semiconductor analyst at Bank of America, said on CNBC's “Squawk Box” on Thursday: “The dot-com boom was created by a shaky business model built on debt. This time, the spending is being driven by the companies with the best balance sheets on the planet. This is mission-critical infrastructure. Capital spending from cloud customers is up 40 to 50 percent. Oracle reported that capital spending is doubling.”

The CNBC survey was conducted between June 7 and June 14 among 25 senior technology executives from large organizations.

Employees Embrace AI

The percentage of employees using AI at work and with permission continues to rise, increasing 10 percentage points to 60% in this survey. The total number of employees using AI in their organizations also increased from 25% of employees to all employees. The largest group of respondents said that use is limited to 25% of employees, which is roughly the same percentage as the last survey conducted in late 2023. For the first time, several companies said that their entire workforce is using AI. These employee usage numbers are trending upward in the near term, with 64% of companies saying they plan to purchase enterprise AI solutions such as Microsoft Copilot within the next six months, also up 10 percentage points from the last semi-annual survey. Additionally, nearly two-thirds of spending is for employee-facing AI, at 64% of companies, while only 16% of respondents said they are focused on customer-facing AI.

Hewlett Packard Enterprise and Nvidia announced a partnership this week to bring AI to the enterprise. HPE CEO Antonio Neri told CNBC on Thursday that the combination of HPE's servers, software and storage with Nvidia's chips and computing platforms will accelerate the adoption of generative AI in the enterprise. Neri said the service will allow companies to deploy AI in “three clicks” and under 30 seconds. Neri said HPE has seen strong demand for large-scale language model training across enterprise customers over the past three quarters.

Dell recently reported that its data center group saw revenues grow 22% year over year to $9.2 billion. Its fastest-growing business was servers, up 42% to $5.5 billion, with AI servers in particular thriving. Dell said it booked $2.6 billion in “AI-optimized” server orders in the most recent quarter.

This generation of AI breakthrough is notable because it came at a moment when traditional semiconductor technology, driven by Moore's Law (the exponential increase in the number of transistors that can be put on a chip), “stood still. So we needed to update our infrastructure anyway. This is a structural new tool, and I think every industry is looking at this, adopting it, and trying to derive insights from the mountains of data that are just sitting there now.”