Citigroup Forecasts Big Tech's AI Spending to Soar to $2.8 Trillion by 2029

Reviewed byNidhi Govil

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Citigroup raises its forecast for AI-related infrastructure spending by tech giants, citing aggressive investments by hyperscalers and growing enterprise demand. The new estimate surpasses $2.8 trillion through 2029, up from the previous $2.3 trillion projection.

Citigroup's Revised AI Spending Forecast

Citigroup has significantly raised its forecast for AI-related infrastructure spending by tech giants, projecting it to surpass $2.8 trillion through 2029, up from its earlier estimate of $2.3 trillion

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. This increase is attributed to aggressive early investments by hyperscalers and growing enterprise appetite for AI technologies

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Source: PYMNTS

Source: PYMNTS

AI Boom and Market Dynamics

The AI boom, ignited by ChatGPT's launch in late 2022, continues to fuel substantial capital outlays and data center expansion. This trend persists despite brief challenges, such as the introduction of China's cheaper DeepSeek model and concerns over U.S. tariff policies

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. Citigroup now anticipates AI capex across hyperscalers to reach $490 billion by the end of 2026, an increase from its previous estimate of $420 billion

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Hyperscalers' Investments and Power Demand

Major tech companies, including Microsoft, Amazon, and Alphabet, have already invested billions to address capacity constraints hampering their ability to meet surging AI demand

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. Citi estimates that global AI compute demand will require 55 gigawatts of new power capacity by 2030, translating to $2.8 trillion in incremental spend, with $1.4 trillion in the U.S. alone

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Source: Economic Times

Source: Economic Times

Shift in Funding Strategies

A notable shift in funding strategies has emerged among big tech firms. They are no longer relying solely on profits to fund AI infrastructure due to the extremely high costs - approximately $50 billion for every 1 GW of compute capacity

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. Companies are increasingly turning to borrowing to keep up with demand, a trend that is already impacting their financials and free cash flows

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Enterprise Adoption and Validation

Citi analysts point to a clear external validation of AI's value, citing production deployments at companies such as Eli Lilly, Hitachi, and Wolters Kluwer

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. Recent conversations with CIOs and CTOs across various industries reflect an increased urgency around AI adoption at the enterprise level

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Financing Methods and Market Concerns

The scale of investment required has led to innovative financing methods. For instance, Oracle recently sold $18 billion of bonds in the second-largest U.S. debt deal this year to support its cloud capacity expansion

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. OpenAI's deal with Nvidia, involving a $100 billion equity investment in exchange for chip deployment, has raised concerns about the concentration and potential circularity of the AI ecosystem

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Future Outlook and Challenges

While the massive investments signal confidence in AI's future, they also introduce new risks and challenges. The shift to debt-funded investments adds fragility to the sector, and questions arise about how tech companies will sustain this scale of investment

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. As the AI infrastructure race accelerates, the focus is shifting from model accuracy to balance sheet durability and the long-term sustainability of these ambitious AI initiatives.

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