Photo: Allison Sanders / sjsu.edu
Former IBM CEO Sam Palmisano warns that the mismatch between long-cycle infrastructure bets and fast-moving AI software demands a Plan B from major tech firms.
The AI gold rush has a timing problem. Companies are pouring hundreds of billions into data centers, chips, and energy infrastructure that takes years to build out, while the software those investments are meant to support evolves on a timeline measured in months. Former IBM CEO Sam Palmisano is now publicly flagging that disconnect, urging Big Tech to develop contingency plans for the very real possibility that their massive capital commitments don’t pay off on schedule.
The spending spree under the microscope #
Microsoft, Alphabet, Meta, and Amazon are collectively projected to spend hundreds of billions annually on AI-related infrastructure. But the picture gets more uncomfortable when you factor in off-balance-sheet commitments, which some analyses suggest could push total future obligations toward $3 trillion.
Palmisano’s core argument is straightforward: the AI boom rests on long-cycle bets in physical infrastructure, but AI software is changing at breakneck speed. The hardware you commit to building today might not be optimally suited for the models and applications that dominate two or three years from now. That asymmetry creates a peculiar kind of risk, one where the investment horizon and the technology horizon are fundamentally misaligned.
The former IBM chief is urging companies to think about what he calls a “Plan B” approach. Not abandoning AI investment, but building in flexibility for a world where adoption curves, software paradigms, or competitive dynamics shift faster than concrete can cure.
Adoption is lagging expectations #
Enterprise adoption of AI outside core technology sectors has been slower than investors originally expected. There’s a meaningful gap between running pilot programs and deploying AI at the scale needed to justify the infrastructure being built to support it.
If the revenue to justify these capital expenditures doesn’t materialize until 2027 or later, companies are effectively asking shareholders to trust them with enormous sums for an extended period with limited visibility on returns. Tech stocks have been showing increased volatility, particularly in response to earnings calls where companies provide guidance on capital expenditures and expected return on investment. Mid-to-late 2026 has emerged as a key window when investors expect to see clearer evidence that these bets are working. Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our