• High interest rates have caused some companies to pull back on tech spending, with AI and cloud the drivers for "critical" new investments, according to a new CNBC Technology Executive Council survey.
• Roughly four times as many corporations say their AI budgets are going to employee-facing tools such as the new Microsoft Copilot suite rather than customer apps like gen AI service and sales chatbots.
• HPE and Nvidia announced a deal this week for enterprise AI adoption that HPE's CEO says can lead to deployment in less than 30 seconds.

High interest rates have taken their toll on overall technology spending budgets across the market, but the critical nature of artificial intelligence and cloud computing to the future of companies across all sectors is the driving force in current spend, according to a new CNBC Technology Executive Council bi-annual survey. Among companies spending on AI, roughly four times as many are investing in employee-facing AI projects rather than customer apps, the survey also found.

Sixty percent of the select group of companies responding to the survey described generative AI as critically important to their business, and artificial intelligence is the single-largest technology spending budget line item for the next year at 44% of companies. Sixty percent of survey respondents described their new AI investments as "accelerating."

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

"There's no doubt the spend that is going to take place on AI will put pressure on other parts of the budget," Pure Storage CEO Charles Giancarlo recently told CNBC, who explained that many companies are in the phase of sorting through all of their internal data to prepare for AI integration. Cleaning up the vast amount of data already stored on a corporate enterprise is a process that could take a few years.

In an interview with CNBC on Thursday, Accenture CEO Julie Sweet said the consulting firm has hit $2 billion in generative AI bookings year-to-date, versus $300 million last year. "A lot of the spending on gen AI today does feel like it's more about prioritizing spending ... clients are focused on transforming using technology, data and AI, so a lot of what's driving our sales is getting ready for AI. You have to build a digital core. We're seeing a lot of modern platforms being put in place because if you can't access your data, you're not going to be able to take advantage of AI," Sweet said.

As Nvidia became the most valuable company in the market this week, Bank of America says gen AI is just in the second year of a three to five year deployment cycle, with hardware demand forecast to triple to $300 billion — up from $100 billion this year, with 80% of that going to Nvidia. "The dotcom boom was created by flaky business models fueled by debt. This time the spending is being done by companies with some of best balance sheets on the planet," Vivek Arya, Bank of America senior semiconductor analyst, told CNBC's "Squawk Box" on Thursday. "It's mission critical infrastructure. We have capex from cloud customers growing 40%-50%. Oracle reported capex would double."

The CNBC survey was conducted among a sample of 25 senior technology executives at large organizations from June 7–June 14.

Employee use of AI

The percentage of employees using AI at work, and using it with authorization, continues to tick higher, up 10 percentage points to 60% in the new survey. The overall number of employees using AI within an organization, anywhere from 25% of workers to all employees, has increased as well. The largest group of respondents still say use is limited to 25% of employees, about the same amount as the last time the survey was conducted in the second half of 2023. For the first time, a few companies indicated that all of their workforce is using AI. These employee use numbers should trend higher in the near-term, with 64% of companies saying they plan to purchase an enterprise AI solution like Microsoft Copilot within the next six months, also up 10 percentage points from the last bi-annual survey. And almost two-thirds of the spend is for employee-facing AI — at 64% of companies, versus 16% of respondents who said customer-facing AI was the focus.

Hewlett Packard Enterprise and Nvidia announced a partnership this week for an AI push into the enterprise, which HPE CEO Antonio Neri told CNBC on Thursday will accelerate generative AI adoption in the enterprise through a combination of HPE servers, software and storage, and Nvidia chips and compute platforms. Neri said the offering will allow an enterprise to deploy AI in "three clicks" and less than 30 seconds. Across corporate clients, Neri said HPE has seen a huge demand for large language model training over the past three quarters.

Dell recently reported that sales from its group selling data centers rose 22% on an annual basis to $9.2 billion, with servers the fastest-growing business, rising 42% to $5.5 billion, and in particular, AI servers. Dell cited $2.6 billion of "AI-optimized" server orders during its most recent fiscal quarter.

The gen AI breakthrough is notable for occurring at a moment when traditional semiconductor technology driven by Moore's Law — the exponential increase in the amount of transistors that can be fit on a chip — "has come to a standstill," Arya said. "So we needed to update the infrastructure anyway. I do think it's structural, a new tool, and every industry is looking at it and trying to adopt it and extract insights from a lot of data just sitting there doing nothing right now."