2026 will be the year of AI software after intense focus on hardware: Bessemer's Byron Deeter

Core Insights - The investment focus is shifting towards AI and its integration into software applications, with a significant increase in data center spending projected to reach $1 trillion annually, up from $550 billion [2] - The anticipated combined spending of $5 trillion over the next several years could imply a potential value of $45 trillion in software and application layers, indicating a major investment opportunity [3] Industry Trends - The current market is witnessing a separation between companies that can successfully integrate AI and those that may struggle, with first-generation cloud and software as a service being viewed as oversold but not obsolete [4] - Companies like ServiceNow and Viva are highlighted as potential beneficiaries of AI integration, while others like Cloudflare and Snowflake may be overvalued in the current market context [5][6] Future Outlook - The foundation models of AI are established, but there is skepticism about their ability to dominate the entire software landscape, suggesting a wave of new companies will emerge [7][8] - By the end of 2026, transitional companies may begin to appear as candidates for IPOs, with a more significant emergence of AI-native application companies expected by 2027 [9]