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Last week I was at the MoneyShow in Las Vegas, where I had the pleasure of presenting and joining a panel on artificial intelligence (AI) and data centers.
It’s always energizing to see familiar faces and meet with investors, but what really struck me was the sheer unanimity of the conversation surrounding AI. Every speaker, every panel, every hallway huddle pointed to the idea that the technology is no longer a speculative play.
Instead, the consensus was that AI represents the next great capital expenditure supercycle. It’s going to reshape every industry it touches, and the companies supplying the picks and shovels—chips, cybersecurity, defense tech—are at the center of it.
The Pentagon’s Friday-Night Ultimatum
By now you’ve likely seen the news that the Department of War (DOW) issued a Friday-evening ultimatum to Anthropic, maker of the Claude AI chatbot, demanding unrestricted military access to its technology.
When Anthropic pushed back—citing its policies against mass domestic surveillance and fully autonomous weapons—the Pentagon took its first steps to label the company a “supply chain risk,” a designation typically reserved for adversarial foreign entities like Huawei. On Friday, President Donald Trump ordered all government agencies to “IMMEDIATELY CEASE all use of Anthropic’s technology,” he wrote on social media.
It’s gripping drama, and as investors, I understand the instinct might be to worry. But I’d urge you to look past the noise and ask yourself: What does it tell us that the government is willing to invoke wartime production powers to gain access to a chatbot company?
The answer, of course, is that demand for AI in defense and national security has reached a level I don’t think most investors have fully priced in.
AI-First Warfighting Force
While the media was focused on the Pentagon-Anthropic standoff, a series of less dramatic, but far more consequential, developments were quietly unfolding.
In January, Secretary of War Pete Hegseth issued two sweeping memos that, taken together, represent the most aggressive AI mandate the Pentagon has ever produced.
The first memo declared DOW an “AI-first warfighting force” and directed every commander to appoint an AI Integration Lead within 30 days. The second went further, warning that any military exercises or experiments that do not “meaningfully incorporate AI and autonomous capabilities” will be flagged for budget review. In other words, organizations that aren’t building AI into their operations risk losing funding.
Follow the Money
The numbers couldn’t be more compelling. JPMorgan projects global cybersecurity will reach $240 billion this year, growing at an 11% compound annual rate to $320 billion by 2029, with AI-driven cybersecurity spending growing three to four times as fast as the overall market.
According to Bridgewater Associates, America’s big four hyperscalers—Alphabet (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), Meta Platforms (NASDAQ:META) and Microsoft (NASDAQ:MSFT)—are expected to collectively invest roughly $650 billion in AI infrastructure this year alone, up from $410 billion in 2025.
To fund this white-knuckle growth, borrowing is projected to expand at an unprecedented pace, with bonds issued by U.S. companies involved in AI on track to reach a new all-time high this year, according to the Institute of International Finance (IIF).
NVIDIA’s (NASDAQ:NVDA) blowout quarter made it clear just how much firms are spending on AI right now. The company reported $68 billion in revenue in the three months ended December 31, up 73% year-over-year, with guidance of $78 billion for the current quarter. Founder and CEO Jensen Huang declared that “the agentic AI inflection point has arrived.”
Why the Cyber Panic Is Overblown
I’d be remiss not to talk about the sell-off in cybersecurity stocks last week. On Monday, Anthropic unveiled a new AI-powered code security tool, and the market panicked. CrowdStrike (NASDAQ:CRWD) and Zscaler (NASDAQ:ZS) dropped roughly 10% each, while smaller names fell even harder. In the chart below, you can see how AI-linked stocks have greatly outperformed software and cybersecurity stocks for the six-month period.
I think the fear is misplaced. AI expands the cybersecurity market, not shrinks it. JPMorgan’s estimate that AI-driven cybersecurity spending will grow at three to four times the rate of the broader market suggests that the companies adapting to this new reality will benefit enormously. The key is investing in companies that are leveraging AI to strengthen their offerings rather than being disrupted by it.
The Investment Theme of a Generation?
Walking the floor at MoneyShow, I was reminded of something I’ve told investors for years: headlines are a terrible investment thesis, but capital flows rarely lie.
The headlines last week were about which AI company the Pentagon will partner with and on what terms. That question will resolve itself eventually. It always does.
What won’t change, I believe, is the trajectory. The AI-in-defense market is projected to grow a 30% compound rate, reaching $18.6 billion by 2029.
Global defense budgets are surging. Cybersecurity is becoming more essential, not less. And the infrastructure buildout—semiconductors, data centers, networking—is accelerating at a pace that’s added a full percentage point to U.S. GDP growth, according to Bridgewater.
As I’ve said before, the convergence of defense spending, AI adoption and cybersecurity demand represents one of the most compelling long-term investment themes I’ve seen in my career. The Pentagon-Anthropic drama may make for great reading, but the capex supercycle unfolding beneath it is where the real story, and opportunity, lies.
Holdings may change daily. Holdings are reported as of the most recent quarter-end. The following securities mentioned in the article were held by one or more accounts managed by U.S. Global Investors as of (12/31/2025): CrowdStrike Holdings Inc.
The S&P Kensho Global AI Enablers Index tracks companies worldwide that develop the infrastructure, software, and services propelling Artificial Intelligence. The S&P Kensho Cyber Security Index is designed to measure the performance of companies focused on protecting enterprises and devices from unauthorized access. The S&P 500 Software & Services Select Industry Index represents the software and services segment of the S&P Total Market Index, tracking companies in application software, systems software, and IT consulting.
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