Corporate tech spending budget is being consumed by AI, with the majority allocated for employee adoption.

• The survey by the CNBC Technology Executive Council reveals that high interest rates have led some companies to reduce their tech spending, with AI and cloud being the main drivers for critical new investments.
• Approximately four times as many corporations are allocating their AI budgets towards employee-facing tools such as Microsoft Copilot suite compared to customer-facing applications like gen AI service and sales chatbots.
• HPE and Nvidia have struck a deal for enterprise AI adoption that HPE's CEO claims can enable deployment in under 30 seconds.

Despite the negative impact of high interest rates on technology spending budgets, the importance of artificial intelligence and cloud computing in shaping the future of businesses is the primary driver of current spending, according to a recent CNBC Technology Executive Council survey. Specifically, the survey revealed that about four times as many companies investing in AI are focusing on employee-facing AI projects rather than customer apps.

The majority of companies surveyed identified generative AI as crucial to their business, and AI is the top technology spending priority for the upcoming year, with 44% of companies allocating funds to this area. Additionally, 60% of survey respondents reported that their new AI investments are speeding up their operations.

Despite concerns about an impending economic slowdown, many companies are pushing ahead with their IT spending budgets to invest in new applications for clients. The biggest risk that tech executives see for their business in the near future is meeting customer demand for new technology, with 28% citing it in a survey, followed by cost-cutting pressures, at 20%. The need to find qualified employees has dropped significantly, from being the top risk cited by 26% of tech executives one year ago, to now only being cited by 4% of survey respondents.

AI integration will put pressure on other parts of the budget, as explained by Pure Storage CEO Charles Giancarlo to CNBC. Many companies are currently sorting through their internal data to prepare for AI integration, which could take several years to clean up the vast amount of data already stored on a corporate enterprise.

In an interview with CNBC on Thursday, Accenture CEO Julie Sweet revealed that the consulting firm has achieved $2 billion in generative AI bookings year-to-date, compared to $300 million last year. Sweet explained that clients are prioritizing spending on AI to transform their businesses using technology, data, and AI. To take advantage of AI, companies must build a digital core, and modern platforms are being put in place to access data.

As Nvidia surpassed other companies to become the most valuable in the market this week, Bank of America predicts that gen AI deployment will take three to five years, with hardware demand forecast to triple to $300 billion from $100 billion this year, with 80% of that going to Nvidia. Vivek Arya, Bank of America senior semiconductor analyst, stated on CNBC's "Squawk Box" that the current spending on AI is being done by companies with strong balance sheets, and that it is mission-critical infrastructure. He also mentioned that cloud customers' capex is growing at a rate of 40%-50%, with Oracle reporting that its capex will double.

A sample of 25 senior technology executives from large organizations participated in the CNBC survey from June 7 to June 14.

Employee use of AI

The percentage of employees using AI at work with authorization has increased by 10 percentage points to 60% in a new survey. The number of employees using AI within an organization has also risen, with some companies indicating that all of their workforce is using AI. The largest group of respondents still reports that AI use is limited to 25% of employees, which is roughly the same as the previous survey. For the first time, a few companies have indicated that they plan to purchase an enterprise AI solution like Microsoft Copilot within the next six months, with 64% of companies planning to do so, up 10 percentage points from the last bi-annual survey. Additionally, almost two-thirds of the AI spending is for employee-facing AI, with 64% of companies reporting this versus 16% who said customer-facing AI was the focus.

HPE and Nvidia have formed a partnership to accelerate the adoption of generative AI in the enterprise. HPE CEO Antonio Neri announced this partnership on CNBC, stating that the offering will allow an enterprise to deploy AI in "three clicks" and less than 30 seconds. Neri also mentioned that HPE has seen a huge demand for large language model training across corporate clients in the past three quarters.

Dell reported that sales from its data center group increased by 22% to $9.2 billion annually, with servers being the fastest-growing business, up 42% to $5.5 billion, and specifically, AI servers. Dell attributed $2.6 billion of "AI-optimized" server orders to its most recent fiscal quarter.

The gen AI breakthrough is significant because traditional semiconductor technology, which relies on Moore's Law to increase the number of transistors on a chip, has reached a plateau. As a result, it was necessary to update the infrastructure. Arya believes that this is a structural shift, a new tool that every industry is exploring and attempting to utilize to gain insights from the vast amounts of data that are currently being underutilized.