Where does federal AI spending stand in 2026?

Where does federal AI spending stand in 2026?

https://www.brookings.edu/articles/where-does-federal-ai-spending-stand-in-2026/

Publish Date: 2026-05-18 10:21:00

Source Domain: www.brookings.edu

• Trump Administration’s AI Blueprint: In July 2025, the Trump administration released its America’s AI Action Plan, emphasizing deregulation and infrastructure investment for global AI dominance. It contrasts with the Biden era’s cautious policies and centers on three pillars: accelerating innovation, building infrastructure, and international diplomacy and security.

• Federal AI Spending Increase: The federal government’s AI spending is projected to surge significantly. Analysis across three years (2022, 2024, and 2026) shows rapid growth in the number and value of AI contracts, with the federal budget in 2026 increasing by 966% over 2024, to $7.2 billion in obligated funds and $91.8 billion in potential awards.

• Dominance of Defense Department: The Department of Defense continues to dominate in both the number and value of AI contracts. In 2026, it secured 98.9% of the total federal AI spend at $90.7 billion, up 1,605% year-over-year.

• Market Maturity Indicators: The market exhibits signs of maturity with the entry of larger firms and an increasing number of firm-fixed price contracts. However, substantial parts of the market still feature single or two-contract vendors indicating an ongoing experimentation phase.

• Small and Minority Business Participation: Despite the significant growth in AI contracts, participation by small businesses remains robust at about 34%, while representation of women-owned and service-disabled veteran-owned small businesses is notably low at 0.05% each and 0.68%.

• Alignment with AI Action Plan: The pillars of the administration’s AI plan are reflected in the federal budget, particularly in accelerating innovation through various contracting methods and infrastructure growth despite the international diplomacy impact remaining unclear.

• Market and Ethical Considerations: As federal AI spending continues to grow sharply, particularly by the Defense Department, the market’s maturity is still questionable along with ethical and legal concerns surrounding AI’s use in warfare and surveillance, as seen in disputes like Anthropic’s refusal to work on autonomous weapons.