AI infrastructure bubble won’t burst until 2027, Northland predicts

Investing.com -- Northland Capital Markets told investors in a note Tuesday that the AI infrastructure boom still has room to run, at least for the next 18 months.

Analyst Gus Richard argues the investment cycle “is in its 7th inning and will slow mid CY27,” adding that despite concerns over data-center buildout constraints, demand remains strong through 2026.

According to Northland, chipmakers currently enjoy “visibility into demand… to the middle of CY27,” supported by hyperscalers’ aggressive capacity expansions.

While U.S. electricity shortages could hinder certain projects in 2026, the firm expects “sovereign demand will likely fill project delays.”

The bigger risk is said to emerge later, with Northland predicting “electricity and capital constraints to worsen in CY27,” potentially triggering a multi-year reset.

Geopolitics could amplify the slowdown. The report warns that after the U.S. mid-term elections, “semiconductor companies’ ability to sell leading-edge AI chips internationally may be curtailed.”

That, combined with capacity bottlenecks, sets up a potential pause lasting “two or three years,” before a “J-shaped recovery” begins.

Northland sees clear winners and losers in this environment. Companies tied to major cloud providers stand to fare best, with the firm stating the “best-positioned AI infrastructure chip companies are those exposed to interconnect and incumbent hyperscalers, ALAB.”

Amazon, Google, Meta and Microsoft, it says, have the financial strength for “persistent” spending, whereas “companies over-exposed to OpenAI/Oracle will likely underperform, AMD.”

Beyond data centers, Northland highlights a second wave of opportunity, edge AI.

The firm believes “edge AI product cycles are in the first inning,” calling it “an underappreciated opportunity,” driven by AI-enabled wearables and cameras. It predicts acceleration in 2026, with “SYNA and AMBA best positioned to benefit.”

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