Just a few months ago, Artificial Intelligence (AI) seemed to be the safest investment trend of the decade. Between 2023 and 2025, tech stocks experienced one of the strongest bull market phases in stock market history. Capital flowed into AI infrastructure, cloud, chips, and software. However, at the beginning of 2026, a surprising counter-movement is emerging. The market is beginning to recalculate the price for this future. The shift in sentiment occurred at the turn of the year: Investors are increasingly fearing that generative AI will not only increase productivity but also destroy business models – across the entire value chain of the digital economy.
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The crucial question on Wall Street is no longer who benefits from AI, but how much value it destroys simultaneously in which industries. This revaluation is now clearly evident in the “Magnificent Seven”: all seven big tech stocks are currently in the red in 2026, against the general market trend. Amazon and Microsoft are even recording double-digit losses, despite continuing to grow solidly operationally and showing few signs of weakness in their latest quarterly reports. However, the market is no longer just evaluating growth prospects, but growth relative to ever-increasing investments.
The major tech corporations have recently massively expanded their AI investment programs (Capex). At the same time, investors are beginning to question the short-term returns of these expenditures more critically. The central valuation problem is: How quickly can the investments be monetized – if at all?
Hype stocks like Palantir, Duolingo, and Reddit are under heavy pressure
Back in 2024 and 2025, rising Capex ratios were a bullish signal, indicating upward momentum. Today, the market increasingly interprets them as a margin risk. Initial profit revisions reflect this uncertainty. For several major cloud providers like Azure and Google Cloud, analysts have recently revised consensus estimates for operating margins in 2026 and 2027 downwards.
In parallel, traditional software valuations are coming under increasing pressure. While many SaaS companies traded at revenue multiples of 10 to 20 in the past decade, the median is now significantly lower. The reason is structural: Generative AI lowers entry barriers, increases competition, and threatens to deflate existing pricing models.
This development also affects hype stocks in the technology sector. Companies like Palantir, Duolingo, Reddit, or AppLovin have lost between 30 and 50 percent since the beginning of the year because their valuations were heavily based on future growth assumptions. Quantum computing stocks have also corrected significantly.
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The parallels to the tech bear market of 2022 are thus obvious. At that time, many hype tech stocks lost 70 to 80 percent from their peak. The current movement follows a similar pattern: first, highly valued growth stocks fall, and then market leaders also come under pressure.
Elon Musk, Sam Altman & Co warn about the disruptive risks of AI for the job market
In addition, there is a macroeconomic dimension. Several tech CEOs have warned in recent weeks about an accelerated disruption of the job market. Mustafa Suleyman, CEO of Microsoft AI, sees major changes coming in the immediate future: “Many traditional office jobs are so standardized and software-intensive in their daily work that ‘for a lawyer, accountant, project manager, or in marketing, most tasks will be completely automated by AI within 12 to 18 months’.
It sounds even bigger – and more dystopian – coming from Elon Musk. He claims, “AI and robots will replace all jobs. Work will be optional.” At the same time, he called AI his “biggest fear” – a technology he considers powerful enough to shift the foundations of work and income. Sam Altman, CEO of OpenAI, also put it in the most extreme terms: In some areas, jobs will “disappear completely.” Altman also warns that changes that used to take generations would accumulate in a short period of time – and that the consequences personally burden him.
Dario Amodei, CEO of Anthropic, adds a sobering note for politicians: AI could eliminate “50 percent of entry-level office jobs”; unemployment could rise to 20 percent in an extreme scenario. He called this “unusually painful” – and added what is probably the most important insight: “Most lawmakers are not aware that this is imminent.”
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If AI replaces jobs faster than expected, this could in turn burden consumption and overall economic demand. For technology companies whose business models depend heavily on corporate and consumer spending, this poses a double headwind. Wall Street is currently trying daily to price in this potential worst-case scenario.
(kbe)