a16z’s State of Markets II finds tech powering S&P 500 earnings as AI spending shifts to hardware

Andreessen Horowitz has published its latest read on public and private markets. The central finding: tech is still carrying the S&P 500, but where that money flows has changed. The report, titled State of Markets II, was released on September 30, 2026, by a16z General Partner David George. Its headline theme is a rotation inside tech itself, away from software, which the firm calls “bits,” and toward hardware, or “atoms.” The engine behind that shift is demand for AI infrastructure. The numbers behind the rotation The report pulls together more than 100 charts covering public and private equity. A few figures stand out. First, tech’s share of the market’s profit story. By a16z’s count, technology accounted for approximately 76% of S&P 500 earnings growth in 2026 as of late August. Second, the spending. Capital expenditures from the major hyperscalers, namely Alphabet, Amazon, Meta, and Microsoft, reached an estimated $780 billion in 2026. That compares with $416 billion in 2025. Third, the forecast. Expectations call for hyperscaler capex to potentially exceed $1 trillion annually starting in 2027. Software grows up, and slows down About 75% of public software companies ar...