Artificial Intelligence in 2026: A Hard Rain’s A‐Gonna Fall

For many reasons, AI may be heading for a storm.

This was a great year for the technology.  It absorbed tens of billions of dollars in spending, in the process accounting for, according to one estimate, fully half of the nation’s Gross Domestic Product increase.  The NASDAQ index, heavy on technology stocks and reacting greatly to AI events, rose 20% during the 52 weeks ending on December 29^th’s early morning.  A large string of niche successes, from health care to robotics to shopping aids, have put AI in the news and in people’s lives.  Companies have generally done well and acted in good faith when problems with their products have materialized.  Press coverage was copious and predominantly positive, with a big drop in the number of stories about how and whether it endangers humankind. 

Yet in some ways, 2025 was more of a getting-into-position year than one of overwhelming success.  The most profitable AI-related companies, starting with Nvidia, were not producing AI tools but providing chips and other resources to those that are.  That firm’s market capitalization, along with that of others, reflects mostly expected future income, dwarfing how much it has had so far.

There are unresolved problems looming.  Many communities have recently said they do not want data centers, which have pushed up water and electricity prices, the latter nationwide.  Chinese competition, from an unfree state which need not reveal the practices it fosters and condones, greatly strengthened this year.  The American people bifurcated, into one group containing about the bottom two-thirds of families by earnings and another with more, and AI has helped the first cohort little while hurting them proportionally more with the higher utility rates.  A variety of lawsuits against these corporations are in progress and have begun to be resolved, starting with the first of many large ones from those owning the rights to books and other material used by AI model builders without authorization.  The emergence of “artificial general intelligence,” not pegged to specific tasks, even in a recently shortened estimate, is expected no sooner than 2029.

What does all that mean?  First, what was accomplished with AI this year does not require huge data centers for improved versions, as it was with largely limited if well-focused applications.  That will also be true for the vast majority of 2026 successes.  Second, if current market valuations are to be maintained, firms selling the software itself will need to start getting amounts consistent with the cost of the chips it requires.  Third, it needs to be perceived as benefiting most Americans, else it may be taken to symbolize the richer-poorer split above.  Fourth, we want to see major-publication articles with titles and contents more positive and less demanding than “A 1 Percent Solution to the Looming A.I. Job Apocalypse” (Sal Khan, December 27^th) and “An Anti-A.I. Movement Is Coming. Which Party Will Lead It?” (Michelle Goldberg, December 29^th, both in the New York Times).  Fifth, it is time for the industry to integrate its opposite communication pairs, of potential and present, 2022 views and 2025 views, and niches and humanity-shaking feats.

For 2026, I predict continuing AI specific application success, but problems of financing, earnings, and public support causing industry concern and even panic.  It may be time for some companies to expensively exit the scene, which many will interpret as a crash or bubble.  Data center construction will level off near the middle of the year and be greatly reduced by Christmas.  Overall, artificial intelligence will end shaky, but in 2027 we will learn with much more accuracy where it is going – and not going.  For now, the people are many and their hands are all empty – as always, we pays our money and takes our chances.