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US startups developing technologies to address power and computing constraints in artificial intelligence (AI) data centres raised USD 33.5 billion in funding by early October 2026, nearly double the total raised in 2025, according to a Morgan Stanley report.
The report said investors are increasingly backing technologies that combine energy supply with computing infrastructure as power availability emerges as a major challenge for the expansion of AI data centres. Venture funding for this universe has accelerated sharply in 2026, reaching USD 33.5 billion by early October, nearly double the 2025 total, the report said. The report added that the next phase of AI infrastructure development is shifting beyond access to computing capacity towards integrated systems that coordinate power, computing, networking and cooling. "Power is the key constraint," the report said, highlighting the growing importance of technologies that can improve efficiency and help data centres secure reliable electricity. Startups covered in the report have raised more than USD 50 billion since the beginning of 2024 across four areas: expanding power supply, improving computing performance per unit of electricity, integrating power and computing systems, and developing new data centre designs and locations. More than 80 per cent of the funding raised in 2026 went to companies working to expand power availability and improve computing performance relative to electricity consumption. Morgan Stanley said investment is also expanding from computing technologies into energy infrastructure. In 2026, 73 per cent of funding rounds in the power and computing segments included investors who had already backed companies in the other segment, compared with 49 per cent in 2024 and 16 per cent before 2021. The report said investors are funding technologies at different stages of development, from cloud providers deploying computing capacity today to advanced nuclear and fusion projects that may take years to generate commercial output. Companies developing orbital and modular data centres, including Starcloud, Cowboy Space and Armada, together raised nearly USD 1 billion in 2026. However, the report cautioned that raising capital alone would no longer be enough to establish the commercial viability of these businesses. "The next phase of validation should increasingly shift from capital raised to capacity deployed," it said, adding that commercial agreements, regulatory approvals, initial deployments and evidence of competitive operating costs would become more important. The report also highlighted risks from licensing requirements, construction delays, grid connections and long procurement cycles. It said local power availability, transmission constraints and regulations are likely to make the economics of data centre projects increasingly dependent on where they are built. The report further said the ability to deploy capacity efficiently and demonstrate commercially viable operations would be crucial as AI infrastructure investment expands. (ANI)
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