Infra Play #138: 2026 State of the market
On the amusing similarities between SaaS and newspapers
One of the more interesting VCs publishing research today is Redpoint Ventures, predominantly because cloud infrastructure software is deeply embedded in their investment thesis.
For the purposes of this article, I’ll go over their early 2026 market update and how to interpret some of the trends we are seeing today.
If it’s not obvious, we are currently seeing a massive investment cycle in AI hardware and software, which is quickly trending towards the single biggest buildout that’s ever happened in the US. I would like to call it “western nations,” but the reality is that by all measurable metrics (GW of compute, early-stage investments, and revenue growth) the race for AI is an American moment in time.
The biggest signal of demand is driven by the hyperscalers, who have significantly stretched their investments into the infrastructure required to scale AI. The important thing is that this level of investment is increasing, something that just a few months ago was seen as impossible.
The talk of the "AI bubble" has also taken a backseat, as the leading companies in the industry are showing high growth (that appears quite durable) and we remain supply constrained. While outsiders with little understanding of where things are going might still blab about it, for all intents and purposes it's obvious that something different is happening right now (even if the classical euphoria meme is literally "this time it's different!").
A lot of the acceleration in the last few months is driven by "AI coding is both the present and the future of developers" becoming a consensus. While this was accompanied by fear campaigns of "all developers will be out of a job," the reality is that technical knowledge has never been more important, as your average company is now able to create and deliver software that previously was reserved only for organizations with tens of engineers.
Interestingly enough, agentic workflows are barely making a dent yet. For most practitioners it's obvious that human-in-the-loop remains very much mandatory for great outcomes; however, it's also not difficult to see this dynamic shifting quickly in a few years.
This has led to an explosion of new software being created. This is not the same thing as "valuable" new applications being created, but then again, agentic coding has also revealed how simplistic and easily replicable most of the software being sold today truly is.