AI data centres and defence tech lead investment wave
Data centres, energy, and military technologies are the main investment channels tech buyers want to pour money into, according to new research.
Law firm A&O Shearman’s latest outlook for technology investment said demand was growing for the infrastructure needed to build and run AI, while software companies faced greater scrutiny over whether AI could replace their products.
“There is enormous demand for the compute, data centres, semiconductors and energy infrastructure needed to support AI, alongside growing interest in defence technology, autonomous systems and quantum,” said William Samengo-Turner, a partner at A&O Shearman.
The comments come as tech companies continue to pour copious amounts of capital into AI infrastructure. Amazon, Microsoft, Google and Meta are expected to spend more than $700bn on AI infrastructure this year, while Britain is competing to attract new data centres and computing capacity.
London-based AI infrastructure company Nscale has raised almost $3.7bn this year to expand its network of AI data centres, while Canada recently backed InvestConnect, a platform designed to connect more than $3tn of global capital with UK infrastructure projects.
The rapid expansion is also putting pressure on Britain’s electricity network. This week Ofgem proposed new fees and stricter rules for large data centres seeking grid connections after applications for capacity rose from 41GW to 125GW in less than a year.
But Matt Evans, chief operating officer and director of market programmes at techUK, told City PM that removing speculative projects was essential but warned the fees must not discourage genuine investment.
“We need a connections process that clears the queue of speculation, boosts our sovereign compute capacity and helps drive re-industrialisation rather than clearing the UK from investors’ shortlists,” he said.
Defence attracts fresh capital
Investment is also accelerating in defence tech as global governments increase military spending and prioritise AI and autonomous systems.
Research published this week showed defence contractors including BAE Systems, Lockheed Martin and Airbus have participated in a record $4.1bn of venture capital funding rounds this year, while defence mergers and acquisitions rose 56 per cent in the first half of 2026.
The figures follow a string of major investments across the sector. Lockheed Martin has pledged at least $100m for UK and European defence tech start-ups, Airbus has backed a new €500m defence fund and BAE Systems has invested €50m into two European venture funds focused on defence.
The UK government is also stepping up spending on military technology, with billions earmarked for drones, AI and autonomous systems under its Defence Investment Plan.
BAE Systems raised its earnings and cash flow guidance on Thursday after a series of contract wins, underscoring continued demand across the sector.
Software faces tougher test
Samengo-Turner said AI was also forcing buyers to rethink how software companies are valued.
“The so-called ‘SaaSpocalypse’ is probably real, but it is not the end of software,” he said.
Rather than paying a premium for businesses with recurring subscription revenues alone, buyers are increasingly looking for companies with proprietary data, products embedded in customers’ day-to-day operations and high switching costs that AI is unlikely to erode.
Companies whose products can easily be replicated by AI are likely to come under greater pressure, while software businesses that use AI to strengthen their products rather than compete against it are expected to attract the strongest interest from investors.