AI: relentless capital spending today, deal catalyst tomorrow
AI is spreading rapidly across industries, but its most immediate impact on markets is being felt through capital intensity. External estimates suggest that between $5tn and $8tn could be required over the next five years to fund AI technologies and the enabling infrastructure for them, such as data centres, chips, networks, and new energy capacity. To put that in context, global M&A values totalled around $3.5tn in 2025. The scale of this investment positions AI as one of the defining capital allocation challenges of the decade.
AI capital expenditures take priority over M&A—for now
The multitrillion-dollar capital expenditure supercycle required to build AI infrastructure and capabilities has the potential to divert capital away from M&A in the immediate future, particularly as hyperscalers, governments, sovereign wealth funds, private equity, and private credit all target AI at scale. This is one of the rare moments of broad global alignment in capital flows, with initiatives ranging from US-backed AI infrastructure programmes and Middle Eastern projects, such as Saudi Arabia’s Project Transcendence, to massive investments by Amazon, Google, Meta, Microsoft, Open AI, and Oracle, among others. This capital expenditure wave is still at an early stage and will continue to absorb funding that might otherwise flow elsewhere, including to acquisitions.
The AI supercycle becomes a catalyst for dealmaking
Over the medium term, however, AI is likely to spur a large increase in dealmaking. If the technology delivers even a portion of its promised productivity and transformation gains, it could trigger a powerful innovation supercycle, reshaping business models across industries and accelerating the pace of strategic change. By taking out costs and lifting productivity, AI has the potential to be structurally deflationary, easing pressure on interest rates and creating a more supportive financing environment. Historically, those conditions have been fertile ground for M&A.
Capital allocation choices intensify in the AI era
AI raises the stakes for capital allocation, forcing CEOs to make difficult strategy choices. This is intensifying portfolio reviews, with divestitures of non-core assets increasingly used to free up capital and prioritise higher-growth or more profitable areas. Beyond the traditional trade-off between organic and inorganic growth, leaders must now decide how aggressively to invest in AI and whether this should be through bespoke generative AI models, agentic AI, or large-scale transformation of core workflows. PwC’s 29th Global CEO Survey highlights that the biggest concern among executives is whether their business transformation is keeping pace with technological change, including AI. Despite AI being top of mind, fewer than one in four companies have built solid foundations for adoption, suggesting that significant transformation and disruption still lie ahead.
AI is already influencing today’s largest deals
AI is increasingly shaping why companies do deals. Our analysis of the 100 largest corporate M&A transactions from 2025 shows that approximately one-third cited AI as part of the strategic rationale. Technology, manufacturing, and power and utilities are the sectors where AI is mentioned most often, reflecting both demand for AI-enabled capabilities and the scale of investment required to support them. Within the technology sector, nearly all the largest transactions announced in 2025 referenced AI in their deal rationale.
