The Stock Market’s Paradoxical Doomsday: Artificial Intelligence Is Running Out of Gas yet Bound to Replace Software
Publish Date: 2026-02-10 15:35:00
Source Domain: www.nasdaq.com
Key Points
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Artificial Intelligence stocks have gotten off to a tough start to the year, due to ongoing concerns about capital expenditures, valuations, and diminishing returns.
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Meanwhile, software stocks have collapsed on concerns that AI will significantly disrupt the industry.
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Can both really be true?
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Heading into the year, investors had concerns about artificial intelligence (AI) stocks. Valuations were high, and the hyperscalers are each planning to pour hundreds of billions into AI-related capital expenditures this year. Investors began to question whether this kind of capex would truly yield worthwhile returns. The group sold off.
In recent weeks, software stocks have also crashed, largely due to concerns that AI can easily replicate or disrupt software-as-a-service (SaaS) products, business models, and margins. The combination of these two dynamics has resulted in a paradoxical doomsday of sorts: AI may be running out of gas, yet it is also going to disrupt software as we know it.
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Image source: Getty Images.
Can AI really be struggling and disrupting software at the same time?
The issue for AI is that large tech companies like those in the “Magnificent Seven” have spent heavily on AI-related capex, yet the market is unsure whether the returns will pan out. For one, there is the issue of resources. AI runs on massive datasets and is powered by data centers. These data centers consume resources like power and fresh water to cool the chips in the data centers.
A report published by the Lawrence Berkeley National Laboratory in December 2024 found that by 2028, over half of the power being used by data centers will be for AI, which could consume enough electricity equivalent to 22% of all U.S. households. Another…
