After years of post-pandemic decline, the consumer technology market is poised for a meaningful recovery. Research firm Circana forecasts U.S. consumer technology sales will reach $112 billion in 2026, representing a turning point for an industry that has struggled with inventory gluts and waning demand since the 2021 peak.

The AI Device Revolution

The catalyst for this recovery is artificial intelligence. Unlike the incremental improvements that characterized recent product cycles, AI-enabled devices are delivering genuinely new functionality that's compelling consumers to upgrade aging hardware.

Smart glasses with AI assistants, laptops with dedicated neural processing units, and smartphones with on-device AI capabilities are transforming what was a replacement-cycle market into a feature-driven upgrade market. This shift matters enormously for consumer electronics retailers who have weathered a challenging few years.

"AI is no longer a buzzword—it's a purchase driver. Consumers are finally seeing practical applications that justify hardware upgrades."

— Consumer electronics market analysis

Category Winners and Losers

The recovery won't be uniform across all technology categories. AI-centric product lines are expected to see the strongest growth, while mature categories like traditional tablets and basic accessories face continued pressure.

Expected outperformers:

  • AI-enabled laptops with neural processing capabilities
  • Smart home devices with advanced voice assistants
  • Wearables incorporating health AI features
  • High-end smartphones with on-device AI processing

Categories facing headwinds:

  • Basic tablets without AI differentiation
  • Traditional desktop computers
  • Entry-level audio equipment
  • Legacy smart home devices

The Post-Pandemic Normalization

Context is essential for understanding the $112 billion forecast. During the pandemic, consumer technology spending surged as remote work and digital entertainment drove extraordinary demand. The years since have represented a painful normalization, with consumers satisfied by the devices they purchased during lockdown.

This normalization is now largely complete. Devices purchased in 2020 and 2021 are reaching natural replacement cycles, and AI features are providing the differentiation needed to motivate upgrades rather than repairs or simple maintenance.

Retail Implications

For retailers, the technology recovery arrives at a critical moment. Best Buy and other consumer electronics chains have struggled with declining foot traffic and compressed margins as consumers delayed purchases. A genuine spending recovery would provide welcome relief.

But the nature of AI-enabled devices creates both opportunity and challenge for retailers. These products often require demonstration and education—advantages for physical retail—but they also carry higher price points that may limit the addressable market to higher-income consumers.

The bifurcation of the American consumer that has defined recent retail trends applies equally to technology. Premium AI devices will find eager buyers among affluent consumers, while price-conscious shoppers may continue to delay upgrades or seek lower-cost alternatives.

Manufacturing and Supply Chain

The $112 billion forecast also reflects improving supply chain conditions. The semiconductor shortages that plagued the industry through 2022 and 2023 have fully resolved, and manufacturing capacity has expanded to meet anticipated demand.

Memory chip prices are set to surge 40% by mid-2026, according to industry forecasts, driven by the AI-related shortage of high-bandwidth memory. This could create margin pressure for device manufacturers, but it also reflects the genuine demand underlying the AI hardware cycle.

Investment Implications

For investors, the consumer technology recovery has multiple beneficiaries:

Component makers: Companies supplying AI processors, memory, and other components essential to AI-enabled devices should see volume growth and potentially improved pricing power.

Device manufacturers: Apple, Samsung, and other major device makers stand to benefit from the upgrade cycle, though competition remains intense and AI features may become table stakes rather than differentiators.

Retailers: Best Buy, Amazon, and other technology retailers should see improved comparable sales as the replacement cycle accelerates.

The Consumer Confidence Factor

The $112 billion forecast assumes continued consumer confidence and stable employment. With the economy showing signs of softness—the December jobs report added only 50,000 positions—the technology recovery depends partly on macroeconomic conditions remaining supportive.

A significant economic downturn would likely delay upgrades and compress the recovery. Technology purchases, while increasingly necessary, remain discretionary for many households. The forecast represents a reasonable base case, not a guarantee.

Looking Ahead

The 2026 consumer technology market represents something of a fresh start for the industry. The pandemic distortions have washed out, AI is providing genuine innovation for the first time in years, and supply chains are healthy.

For consumers, this means compelling reasons to upgrade aging devices. For investors, it means potential opportunities in a sector that has underperformed during the post-pandemic adjustment. And for the economy, a $112 billion technology market provides meaningful support for retail sales and manufacturing activity.

Whether the AI-driven upgrade cycle proves as durable as forecast will be one of the important stories to watch as 2026 unfolds.