Good morning. Demand for AI continues to soar, driving up spending on information technology across the spectrum, a new forecast from business and technology insights firm Gartner shows.

The report, released this morning, says worldwide IT expenditures are on track to reach $6.15 trillion in 2026, up 10.8% from 2025.

Budgets decisions directed by corporate CIOs and business technology leaders have a huge impact on the volume of revenue flowing into every facet of the AI ecosystem, from model developers to computing and memory chip makers, device manufacturers, data center builders and energy producers.

Let’s take a look at where those budgets are headed. Just over three years into the current AI boom, the momentum behind that spending is notably strong.

“AI infrastructure growth remains rapid despite concerns about an AI bubble, with spending rising across AI‑related hardware and software,” said John-David Lovelock, distinguished vice president analyst at Gartner. “Demand from hyperscale cloud providers continues to drive investment in servers optimized for AI workloads.”

Highlights from the 2026 Gartner forecast:

• Server spending is projected to grow 36.9% year-over-year.
• Total data center spending is expected to rise 31.7% to  more than $650 billion, up from nearly $500 billion last year.

Even the outlook for software spending, which has been called into question by the prospect of AI-based disruption, is headed up. Software growth for 2026 was revised down to 13.7%, from 15.2% for both applications and infrastructure. Lovelock called it a “modest revision” that will leave total software spending above $1.4 trillion.

Total spending on devices is projected to reach $836 billion, but growth will slow to 6.1%.  “This slowdown is largely due to rising memory prices, which are increasing average selling prices and discouraging device replacements,” Lovelock said.

And then there’s generative AI. Projections for gen AI model spending in 2026 are unchanged, with growth expected at 80.8%, according to Gartner. “GenAI models continue to experience strong growth, and their share of the software market is expected to rise by 1.8% in 2026,” Lovelock said.

The magnitude of corporate spending on information technology will have profound implications this year for companies throughout the AI ecosystem and their investors. And that  spending on AI is changing the way all companies and individuals do business.

Where is your IT budget headed? Use the links at the end of this email and let us know.

Elon Musk said SpaceX acquired xAI. The tie up gives Musk's AI company direct access to SpaceX’s distribution and infrastructure edge, extending its reach into orbit, WSJ reports. SpaceX operates a fleet of reusable rockets, spacecraft that ferry astronauts to orbit and Starlink, the world’s largest satellite constellation, positioning the company to push AI connectivity beyond terrestrial networks.

On Friday, SpaceX said in a U.S. regulatory filing that it aims to deploy an orbital network of up to one million satellites to power AI data centers, a plan that will require approval from telecommunications authorities.

The combined company is valued at $1.25 trillion, people familiar with the matter said. SpaceX was already one of xAI’s earliest customers in 2024, The Wall Street Journal previously reported.

Nvidia and OpenAI try to calm jitters. Nvidia and OpenAI are working to reassure investors that their partnership remains solid, even as tensions surface over dependence and strategy, Barron's reports. Concerns grew after the WSJ reported Nvidia was delaying a potential $100 billion investment in OpenAI, prompting CEO Jensen Huang to say the company still plans a “huge investment,” without giving details. Reuters then reported that OpenAI is unhappy with some of Nvidia’s newest AI chips and is seeking alternative hardware suppliers for about 10% of its inference workload. OpenAI didn’t comment, but CEO Sam Altman posted on social media to calm speculation.

Chips in play. The two companies’ hedging helps explain Nvidia’s decision to license Groq technology, as the Journal reported earlier. Groq’s “language processing unit” chips are built for inference. OpenAI rival Anthropic depends heavily on Amazon Web Services’s Trainium chips and on Google’s TPUs; Google relies mostly on its own TPUs. OpenAI, meanwhile, has broadened its supplier base with deals involving Advanced Micro Devices, Broadcom and Cerebras Systems, Barron’s said.

Google is getting into the power business. The company plans to spend $4.75 billion to acquire Intersect, a wind and solar developer in a move the WSJ says could help it more easily bring new data centers online. Power officials increasingly favor tech firms that bring their own electricity--let's call it BYOE--reducing the need for new centralized plants and transmission lines, though most centers will still tap the grid as needed.

Google already leads rivals in securing constant clean power, from early nuclear- and geothermal-development deals to experiments that cut data-center load during grid stress.

$350 billion. That’s Palantir’s market capitalization. No other company in the S&P 500 has reached a valuation that high on so little revenue.

$126 billion. Waymo's new valuation after raising $16 billion, Bloomberg reports. The round was led by Sequoia Capital, DST Global and Dragoneer Investment Group.

11%. How much fitness-technology company Peloton cut its staff last week, with engineers among the most affected, Bloomberg reports.

Palantir climbs, ICE criticism intensifies. Palantir, which builds software to centralize and analyze large data sets, reported $1.41 billion in fourth-quarter revenue, a 70% jump from a year earlier, and net income of $609 million, a quarterly record.

The company’s cachet in Washington has helped it gain more large government contracts. But the WSJ reports that criticism over its work with Immigration and Customs Enforcement in the past year from current and former employees and elected officials has cast a shadow over the company’s stock-market run. Palantir has stood by its work for ICE.

Research tensions at OpenAI. The Financial Times reports that several recent departures from OpenAI stem from a sense that the company is prioritizing its flagship chatbot over long-term research. People close to the company say researchers have seen more requests denied in recent months. OpenAI’s chief research officer, Mark Chen, told the FT that “long-term, foundational research remains central to OpenAI.”

A Strategic Petroleum Reserve, but for minerals. The Trump administration is planning a roughly $12 billion stockpile of critical minerals including rare earths, WSJ reports. China, which last year imposed licensing requirements for U.S. companies, controls about 90% of the processing capability for rare-earth minerals, critical components for the defense and automotive sectors.

AI could spark a surge in private-credit defaults. UBS analysts warn that if AI disrupts businesses faster than expected, default rates on private loans could climb to 13%. About 35% of the private-credit market is tied to industries most exposed to AI risk, UBS analysts have estimated, according to Bloomberg.

Russian black-market stopped. Elon Musk said his Starlink had stopped “unauthorized use” of the satellite internet terminals by Russian drones, after Ukraine appealed for help disabling the communication technology, WSJ reports. Starlink isn’t active in Russia, but a black market emerged with middlemen funneling terminals to Russian forces.

The manufacturing boom President Trump promised would usher in a golden age for America is going in reverse. After years of economic interventions by the Trump and Biden administrations, fewer Americans work in manufacturing than any point since the pandemic ended. (WSJ)

The fatal shootings of Alex Pretti and Renee Good are fueling new efforts to fill a longstanding gap in U.S. law: It is nearly impossible to hold federal agents liable for causing someone’s death. (WSJ)

Siemens Energy plans to spend $1 billion to boost its manufacturing of grid and power-generation equipment in the U.S. as demand for electricity soars. (WSJ)

Former President Bill Clinton and former Secretary of State Hillary Clinton made a new offer Monday to give depositions for a House committee’s investigation of sex offender Jeffrey Epstein, just days ahead of an expected vote on contempt of Congress for the Democratic power couple. (WSJ)

This February 10–11, technology leaders will gather in Palo Alto for The WSJ Technology Council Summit to explore the realities of enterprise AI, the evolving role of tech leadership and the urgency behind building meaningful, business-driving AI strategies. Join the Technology Council and be part of the conversations shaping the future of corporate innovation.

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