Microsoft (NASDAQ:MSFT) remains the leading generative AI partner that CIOs are considering, significantly ahead of Amazon (NASDAQ:AMZN) and Google (NASDAQ:GOOGL).
Regarding funding for GenAI projects, 71% of CIOs anticipate securing new or additional funding (up slightly from 70% last quarter), while 29% believe the funding will come from existing resources. Some CIOs expect to reduce spending on vendors such as Oracle (NYSE:ORCL) to allocate more funds to GenAI investments.
Organizations are projected to increase their GenAI spending by an average of 13% in the near term. However, it is still "early to identify clear winners," with the median percentage of use cases in the testing phase between 31-40% and in the production phase between 11-20%.
The survey reveals that "46% of respondents have seen GenAI projects negatively impact traditional IT budgets, with back-office and consulting projects as the top affected categories, and the median impact on traditional IT budgets between 7-9%."
Overall, Citi's 2Q CIO survey showed mixed results, with a slight deterioration in the IT budget environment, primarily due to Europe. However, US near-term IT budget growth expectations improved notably to 3% this quarter, up from 2.2% in the March quarter survey, and surpassing the historical average of 2.7%.
Cybersecurity remains the top investment priority for CIOs, followed by Data modernization/GenAI, though its importance has diminished compared to March, Citi noted.
This “may be a slightly negative read-through for MSFT, ESTC, SNOW, MDB, INFA, CFLT and TDC,” analysts highlighted.
Digital Transformation Projects also remain a top-three priority but have fallen in importance since March, potentially tied to enterprises refining their generative AI strategies. Robotics/Automation remains the fourth priority.