AI Market Forecast: Top Trends for AI in 2026
Artificial intelligence (AI) has cemented its role as a key sector for investors, but its path forward is shifting.
Several catalysts, including sustained AI infrastructure spending and US Federal Reserve interest rate cuts, are poised to drive tech sector growth in 2026; however, massive capital expenditure digestion by hyperscalers, alongside increasing demands for a return on investment and persistent power supply limitations, are influencing a rotation in focus, with risks like high valuations and policy uncertainty potentially capping AI industry gains.
Overall, experts are calling for the technology sector to navigate a delicate balance between aggressive expansion and necessary financial discipline in 2026, with AI at the heart of these matters.
Capex digestion and AI verticalization
AI capital expenditures by hyperscalers are projected to fuel demand for semiconductors, data centers and related infrastructure in the year head, as per Nicholas Mersch, portfolio manager at Purpose Investments.
According to notes from multiple analysts, the Big Four — Meta Platforms (NASDAQ:META), Microsoft (NASDAQ:MSFT), Alphabet (NASDAQ:GOOGL) and Amazon (NASDAQ:AMZN) — are slated to spend over US$300 billion on AI infrastructure. Mersch cited forecasts that see hyperscaler capex hitting roughly US$600 billion in 2026.
“Others expect a 20 to 30 percent pullback as platforms pause to digest what they have built and shift focus from training to monetizable inference,” he wrote in an email to the Investing News Network (INN).
“Over the next 12 to 24 months, the narrative likely shifts from who can build fastest to who can drive the highest revenue and margin per dollar of AI infrastructure,” Mersch added. “This is where verticalization matters. The companies that can capture the full stack, from silicon to applications, look like they will win.”
His top pick in this arena is Google, followed by Microsoft.
While the cloud layer remains a high-stakes game of concentration among a few platforms, Mersch said the hardware layer underneath is beginning to fragment as the chip stack quietly diversifies.
“Large multi-year AI chip deals are broadening the market beyond NVIDIA (NASDAQ:NVDA), with Advanced Micro Devices (NASDAQ:AMD) and custom application-specific integrated circuit (ASIC) programs winning meaningful share. High-bandwidth memory (HBM) has become the real bottleneck and profit pool, with tri-sourced HBM3E, an emerging HBM4 race and surging HBM demand from ASICs,” the expert said.
“The result is a more plural, multi-vendor accelerator ecosystem. Looking out to the second half of the decade, total AI silicon spend can keep growing even if individual GPU vendors see more competition and pricing pressure, with memory, packaging and custom silicon capturing a larger share of the economics.”
Chip diversification, however, is now colliding with HBM and packaging shortages, constraining output from 2026 to 2027. BMI’s…