Northland Capital Markets told clients on Tuesday that the current boom in AI infrastructure spending is far from over, anticipating another year and a half of strong momentum.
Analyst Gus Richard wrote that the investment cycle “is in its 7th inning and will slow mid CY27,” noting that even with ongoing concerns about limits on data-center construction, demand appears solid through 2026.
Northland says chip suppliers currently have “visibility into demand… to the middle of CY27,” thanks to hyperscalers continuing to expand capacity at an aggressive pace.
Although U.S. power shortages could delay some projects in 2026, the firm believes “sovereign demand will likely fill project delays.”
The more significant challenges, however, may surface later. Northland forecasts that “electricity and capital constraints to worsen in CY27,” which could lead to a prolonged reset in spending.
Geopolitics could add to the pressure. The report cautions that after the U.S. mid-term elections, “semiconductor companies’ ability to sell leading-edge AI chips internationally may be curtailed.”
Taken together, these factors could produce a slowdown lasting “two or three years,” before demand rebounds in a “J-shaped recovery.”
Northland also identifies the likely beneficiaries of this environment, pointing toward companies aligned with the major cloud giants. The firm says the “best-positioned AI infrastructure chip companies are those exposed to interconnect and incumbent hyperscalers, ALAB.”
Amazon (NASDAQ:AMZN), Google (NASDAQ:GOOG), Meta (NASDAQ:META) and Microsoft (NASDAQ:MSFT) are flagged as the strongest buyers, with Northland noting they have the financial capacity for “persistent” investment. In contrast, it warns that “companies over-exposed to OpenAI/Oracle will likely underperform, AMD (NASDAQ:AMD).”
Beyond cloud data centers, Northland sees a powerful next wave emerging at the network edge. The firm argues that “edge AI product cycles are in the first inning,” calling it “an underappreciated opportunity” fueled by AI-enabled wearables and cameras. Northland expects the category to accelerate in 2026, saying “SYNA and AMBA best positioned to benefit.”
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