Who Pays For AI?
Sustaining that buildout will require ongoing demand, and we believe enterprise spending offers a clear early signal that businesses are willing to pay for AI at scale.
Investment in artificial intelligence (AI) infrastructure has surged in recent years, with hundreds of billions of dollars flowing into data centers and related services. For that figure to scale into the trillions, sustained demand from enterprises and consumers will be essential. While consumer adoption remains important over the long term, we believe enterprise spending provides a clear near-term signal of willingness to pay for AI at levels needed to support the capital buildout.
- A recent survey conducted by economists at the Federal Reserve Bank of Atlanta, in collaboration with academic researchers, revealed that spending on AI is broadening across the economy. In the survey, AI spending was defined to include “software, subscription services, hardware, worker training, and IT staff support.” While most of the investment is currently concentrated in large firms, including cloud hyperscalers, smaller firms are rapidly increasing their AI spending. As shown above, companies with fewer than 100 employees are expecting to nearly double their AI investment in 2026, growing at a significantly faster pace than those with more than 250 employees, albeit from a smaller base.
- Growth is widespread by industry. Year-over-year, construction and real estate spending on AI grew 47%, manufacturing 34%, and retail 39%. Business and professional services lead at 74%, which we attribute to its high concentration of knowledge-based tasks well-suited to AI tools.
- We believe this survey supports the view that AI investment is becoming more pervasive, with meaningful growth potential as model capabilities improve and companies integrate AI more effectively into their workflows. While larger firms still account for the bulk of AI spending, smaller firms may accelerate the overall pace of AI investment as they grow faster and narrow the gap. In our view, this bodes well for AI enablers, such as the providers of logic, memory, networking and power that form the foundation of AI services.
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The views expressed are the views of Fred Alger Management, LLC (“FAM”) and its affiliates as of May 2026. These views are subject to change at any time and may not represent the views of all portfolio management teams. These views should not be interpreted as a guarantee of the future performance of the markets, any security or any funds managed by FAM. These views are not meant to provide investment advice and should not be considered a recommendation to purchase or sell securities.
Risk Disclosures: Investing in the stock market involves risks, including the potential loss of principal. Growth stocks may be more volatile than other stocks as their prices tend to be higher in relation to their companies’ earnings and may be more sensitive to market, political, and economic developments. Past performance is not indicative of future performance. Investors whose reference currency differs from that in which the underlying assets are invested may be subject to exchange rate movements that alter the value of their investments. Companies involved in, or exposed to, AI-related businesses may have limited product lines, markets, financial resources or personnel as they face intense competition and potentially rapid product obsolescence, and many depend significantly on retaining and growing their consumer base. These companies may be substantially exposed to the market and business risks of other industries or sectors, and may be adversely affected by negative developments impacting those companies, industries or sectors, as well as by loss or impairment of intellectual property rights or misappropriation of their technology. Companies that utilize AI could face reputational harm, competitive harm, and legal liability, and/or an adverse effect on business operations as content, analyses, or recommendations that AI applications produce may be deficient, inaccurate, biased, misleading or incomplete, may lead to errors, and may be used in negligent or criminal ways. AI companies, especially smaller companies, tend to be more volatile than companies that do not rely heavily on technology.
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