What's up: tech firms that IPO'd this year now stumbling; AI's smaller role in GDP; China's fears AI could hurt Communist Rule.

Good morning. So how much are hyperscalers really spending on data center construction projects right now? And where is that money actually going? It turns out, thanks to some rigid accounting standards, it’s really, really hard to tell. 

Tech companies often provide the cost of AI data centers and chips associated with a long-term construction project. The catch: They generally don’t break out the costs for each, nor are they required to do so, despite the vastly different time periods in which facilities and chips depreciate, the WSJ Leadership Institute’s Mark Maurer reports.

That means the cost of chips that may have to be replaced in a few years or less can be lumped together with buildings that can stand for decades. This has some investors in the dark about some details about tech giants’ surging spending.

“The construction-in-progress account is this big hole where hyperscalers can bury a lot of their costs,” said Gaurav Kumar, an accounting professor at the University of Arkansas at Little Rock.

Big questions also remain about the longevity of AI chips, as many tech companies in recent years have said they expect their servers and network equipment to last longer without replacing or discarding them. (Replacing the equipment less frequently helps preserve cash flows.)

The bottom line, according to Ravi Gomatam, co-founder of Zion Research Group, is shareholders in the tech companies are struggling to adequately gauge the risk of the AI investments.

The Morning Download is taking a break for the holidays and will return Jan. 2. See you in the new year!

Deal season isn’t just for retailers. ServiceNow and Samsung are scooping up tech assets. Meanwhile some recent tech IPOs are looking like post-holiday returns. 

ServiceNow will buy cybersecurity startup Armis for $7.75 billion in cash to meet rising demand for AI-security tools, WSJ reports. Armis, recently valued at $6.1 billion, had been eyeing a 2026 or 2027 IPO. ServiceNow says the deal will triple its security market opportunity and help build an end-to-end platform linking threat intelligence, asset discovery, and automated remediation.

Samsung Electronics plans to acquire the advanced driver-assistance systems business of Germany’s ZF Friedrichshafen, stepping up its push into vehicle components, WSJ reports.

More than two-thirds of this year’s tech IPOs are trading below their debut prices, a record that could cast doubt on next year’s pipeline, the Information reports. The 23 newly public firms are down a median 9% while the S&P 500 is up 18%. Notable class of 2025 laggards include StubHub and Klarna. 

The U.S. economy expanded at a 4.3% annual rate in the third quarter, the highest growth in two years, exceeding forecasts.

Artificial intelligence-related spending was certainly in the mix, although the pace of growth appeared to cool from the second quarter, WSJ reports. 

Barclays estimated that AI-related investment contributed about 0.4 percentage point to third quarter GDP growth, down from roughly 1 percentage point in the first half of the year.

After freezing billions in Biden-era battery grants, the Trump administration has belatedly realized it kneecapped an industry essential to both AI and national defense, the New York Times reports. 

AI data centers depend on batteries for backup, and the military will need millions more to power drones, lasers and next-generation weapons. Now the White House is scrambling—holding high-level supply-chain meetings and quietly reviving shelved grants. But the gap is immense: China dominates battery technology and controls key mineral refining, from lithium to graphite.

Beijing is taking extraordinary steps to keep AI under control, amid fears that it could threaten the Communist Party Rule. Although China’s government sees AI as crucial to the country’s economic and military future, regulations and recent purges of online content show it also fears AI could destabilize society. Chatbots pose a particular problem: Their ability to think for themselves could generate responses that spur people to question party rule.

The Trump administration will impose new tariffs on Chinese semiconductor imports starting June 2027, with rates set a month in advance. Until then, the tariff rate stays at zero. CNBC reports the 18-month delay underscores Washington’s desire to avoid inflaming trade tensions, even as the administration concludes China uses unfair trade tactics in the chip industry.

The estate of billionaire Robert Brockman will pay $750 million to settle what prosecutors called the largest individual tax-fraud case in U.S. history. The IRS had sought $1.4 billion, alleging Brockman, a Texas automotive-software entrepreneur, hid more than $2 billion through offshore entities. Brockman, who denied wrongdoing, died in 2022 before trial. 

We asked Morning Download readers to share some of the most important books they have read over the last year.

Trevor Schulze, chief information officer, Geneys
Artificial Intelligence: A Modern Approach
Stuart Russell and Peter Norvig (2021)

“My copy is highlighted, dog eared and regularly pulled off the shelf. This is the book the AI community itself treats as the authority and that matters more than trends. It explains what AI actually is, how it really works, and where its limits are. For a CIO that clarity is power. It helps me cut through hype, challenge vendors, and make decisions rooted in understanding rather than momentum. It's not light reading but it has become my long-term reference that quietly raises the quality of every AI conversation I have.”

Ariel Katz, chief executive officer, Sisense
Nexus: A Brief History of Information Networks from the Stone Age to AI
Yuval Noah Harari (2024)

“As a leader, I’m constantly navigating the efficiency trap - the risk that we use AI to do the wrong things faster. Harari’s insight that information networks often prioritize order and scale over truth was a wake-up call. It pushed me to rethink my role from deploying technology to designing accountability - clarifying who owns decisions, how assumptions get tested, and how we keep human judgment at the center. As systems become more autonomous, this book is a practical framework for ensuring our organizations don’t become less human.”

Rob Scudiere, chief technology officer, Verint
AI 2027
Daniel Kokotajlo, Eli Lifland, Thomas Larsen and Romeo Dean

“I found this publication interesting and important because it provides a credible scenario about the near-term future of artificial intelligence—specifically, the possibility of reaching artificial general intelligence. The authors, with feedback from more than 100 industry experts, explored the policy and safety implications of rapid AI progress, forcing us to think about how we navigate toward positive outcomes rather than catastrophic ones.”

Howie Xu, chief AI & innovation officer, Gen Digital
Growth Data Analytics Playbook: The Modern Guide to Finding, Measuring, and Scaling Product-Market Fit
Mengying Li, Joe Kumar, Yuzheng Sun (2025)

“We talk about ‘data’ and ‘product-market fit’ all the time, but almost no book has connected the two in a practical and actionable way. This one does. It shows how to quantify product-market fit using real retention data and how to understand the behaviors of your most engaged users through systematic analysis.”

Luca Bonmassar, chief technology officer, Checkr
The Advantage: Why Organizational Health Trumps Everything Else In Business
Patrick Lencioni (2012)

“This is a clear case that organizational health is a strategic advantage. Lencioni shows how alignment, trust, and disciplined leadership enables companies to execute faster and more effectively–especially during periods of growth and transformation.”

Murali Swaminathan, chief technology officer, Freshworks
The Technology Fallacy: How People Are the Real Key to Digital Transformation
Gerald C. Kane, Anh Nguyen Phillips, Jonathan Copulsky, Garth R. Andrus (2019)

"The Technology Fallacy reinforces a critical lesson for today's AI era: Digital transformation succeeds not through technology alone, but when leaders build the culture, talent, and operating models needed to turn innovation into sustained business advantage.”

The U.S. moved large numbers of special-operations aircraft, troops and equipment into the Caribbean area this week, giving Washington additional options for possible military action in Venezuela. (WSJ)

The Supreme Court on Tuesday blocked President Trump from sending the National Guard into the Chicago area, dealing a rare loss to the president on an issue of executive power. (WSJ)

The Justice Department released a second trove of files related to the late Jeffrey Epstein, including a fake Austrian passport and copies of Epstein’s will that listed several of his powerful friends as executors. (WSJ)

The Education Department said Tuesday that it will resume garnishing the wages of student loan borrowers who are in default starting early next year. The department said it expects the first notices to be sent to about 1,000 borrowers in default the week of Jan. 7. (WSJ)

This February 10–11, technology leaders will gather in Palo Alto for The WSJ Technology Council Summit to explore the realities of enterprise AI, the evolving role of tech leadership and the urgency behind building meaningful, business-driving AI strategies. Join the Technology Council and be part of the conversations shaping the future of corporate innovation.

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The WSJ CIO Journal Team is Steven Rosenbush, Isabelle Bousquette and Belle Lin.

The editor, Tom Loftus, can be reached at thomas.loftus@wsj.com.