Executive Summary

• In this Part 1 of our 3-part technology outlook for 2026, we discuss key themes and our updated fundamental views across a variety of subsectors. In Part 2, we’ll discuss our sector recommendations, issuance expectations, and M&A. In Part 3, we’ll discuss our Picks & Pans.

• We are projecting capex for the top 5 hyperscalers to increase from ~$256 bn in 2024 (+63% YoY) to ~$446 bn in 2025 (+74% YoY) and ~$620 bn in 2026 (+39% YoY); we expect capex as a percentage of sales to increase in 2026 across all the hyperscalers.

• We expect public cloud revenue growth rates to remain high in 2026, defying the law of large numbers; AI cloud capacity remains constrained and as soon as more capacity comes online, it will be immediately converted into revenue growth.

• We think PC shipments could be down ~2% YoY in 2026 although revenue might be up low single digits YoY; we expect margin pressure in mid/late 2026 driven by the memory super cycle, although inventories on hand can be used for shipments in early 2026.

• The semiconductor upswing is approaching late cycle territory, but we see continued AI investment and an extraordinarily tight memory market driving another strong growth year (base case of +20%); we expect memory sales to grow nearly 50% and non-memory sales to grow low-teens in 2026.

• Semi-cap equipment saw solid growth last year, and we see further upside in 2026 as consensus for ~7% growth is well below our estimate of ~14%; we think the industry will soon need to accelerate capex investment to accommodate growing backlogs, especially at the memory producers.