February 5 2026 – More volatility is expected in tech stocks over the next few months as the market contends with fresh evidence that artificial intelligence is beginning a wider reckoning and as fears grow about its disruptive effects on existing business models.
This is the warning from the CEO of one of the world's largest independent financial advisory organisations as software and services equities tumble sharply on concerns that faster, more capable AI tools could erode pricing power in legacy software models, wiping out nearly $1 trillion in market value in recent sessions.
Nigel Green, chief executive of deVere Group, says today's market moves mark a fundamental re-evaluation of value in the digital economy.
He explains: “Investors have moved beyond AI hype and are now rigorously testing business models against the harsh reality of what these technologies actually deliver.
“When machines can automate complex analytical, legal and compliance tasks that once justified premium pricing, the entire logic underpinning software valuations is up for re-assessment.”
This transition from optimism to differentiation has created pronounced bifurcation across technology sectors.
While AI infrastructure and data-centre builders have held relatively firmer ground, companies built on recurring software licences and process automation have been most exposed in the selloff.
“What we're witnessing isn't simply 'AI excitement ebbing', it's a redefinition of which parts of tech genuinely benefit from intelligence automation and which parts are most vulnerable to obsolescence.”
Market indicators underscore these tensions. Software indexes in Europe, the US, and Asia have all posted steep declines as investors digest the implications of new generative AI tools that handle core enterprise workflows.
The Nasdaq's tech-heavy profile has felt particular strain, while commodities such as gold and precious metals have risen as traditional safe havens amid equity volatility.
Meanwhile, some tech names with deep AI concentration or earnings resilience have bucked the trend, reflecting a growing premium for proven monetisation and sustainable margins.
The deVere boss emphasises that this moment is not solely about fear of technology replacing humans.
“The deeper issue markets are grappling with is economic: pricing power is now being adjudicated through AI's ability to unbundle value, compress workflows, and deliver outputs with minimal human intervention.
“In sectors where incumbents cannot justify their cost structures in an AI-driven context, valuations are adjusting rapidly and ruthlessly.”
He highlights two core mechanisms driving the sell-off.
First, AI diminishes switching costs by offering equivalent or superior service with far less friction, making entrenched long-term contracts less defensible.
“When customers can pivot to intelligent agents that perform at scale and at lower cost, the lock-in that once supported high valuations starts to evaporate.
“Second, the gap between promise and monetisation narrows under scrutiny, forcing investors to think much more critically about earnings sustainability.”
Nigel Green underscores that volatility may persist until the market reaches a new equilibrium on how AI translates into durable profit streams.
“Expect continued differentiation,” he says. “Companies that control the economics of AI — through proprietary infrastructure, data moats, or genuine scarcity in service delivery — will attract capital.
“Others that merely embed generic AI capabilities to defend legacy models will find their margins under sustained pressure.”
He also notes that geopolitical and macroeconomic factors are amplifying these thematic shifts.
With macro risks such as tariff tensions and interest rate uncertainty still present, capital flows are increasingly selective, favouring quality and proven growth prospects over broad momentum.
“AI intersects with macro realities that heighten market sensitivity to any signal that future earnings could be compromised.”
Looking ahead, the CEO anticipates further stock price dispersion in the tech complex as earnings releases and valuations are recalibrated against real economic benefit from AI deployment.
“Investors will reward companies that demonstrate clear revenue capture from their AI investments,” he notes.
“Conversely, those that fail to adapt cost bases or innovate beyond legacy frameworks will continue to face valuation headwinds.”
In his view, this period of adjustment, while uncomfortable, represents a maturation of how markets price innovation in a world where intelligence automation is rapidly becoming a fundamental competitive factor.
“The era of unquestioned software pricing power is ending.”
He concludes: “Markets are now pricing based on tangible economic differentiation, not narrative alone.
“This will create volatility, as we've seen in the last few days – and volatility always creates important investor opportunities.”
deVere Group is one of the world's largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients. It has a network of offices around the world, more than 80,000 clients, and $14bn under advisement.