The AI paradox.

February 9th, 2026

Thoughts of the Week

Not a week passes without AI dominating the news. And this is normal, as many analysts have expressed the view that the impact of the AI revolution on the everyday life of the average person could be as significant as the internet was in the early 2000s. The world in 2023 woke up to this new reality with the launch of ChatGPT and during these three years the developments have been evolving at "light-year" speeds. The deployment of AI infrastructure has created the largest capex spending on record, and it will reach 650bn$ this year, just from the largest four US companies alone.

Investor nervousness has already emerged. Microsoft's 10% drop after its earnings has now brought the stock almost 30% down from its not-so-distant high and last week it was the turn of the largest spender of them all, Amazon, who cratered by 20%. Nasdaq is still negative for the year. The rationale behind the current sell-off is that the huge spending is expected to outpace revenue growth for a third year in a row and their latest quarterly reports did not show any material monetization of AI spending. It is no surprise that the mega cap company which has been reluctant to throw hundreds of billions into AI infrastructure has been lately outperforming the rest and this is Apple.

But the real carnage has been with SaaS stocks (or in other words Software As A Service). Last week they fell 10% and the index that follows the specific stocks is now 22% lower on year-to-date basis. This Tech subsector has been weak all year long but the "nail-in-the-coffin" was put by Anthropic's release of specialized plug-ins for its Claude Cowork agent which is now targeting legal, compliance and professional services workflows. Traders were quick to dub the term "Saaspocalypse" ... The news was a wake-up call for investors in companies whose core business model is workflow automation (contract review, document management etc.) and which could be facing existential pressure as AI agents could be helping clients without having to pay the subscription for the application.

And this is where a paradox lies. Investors have simultaneously priced the scenario of weak Return on Investment for AI infrastructure (i.e. Amazon, Microsoft sell-off) and at the same time a scenario of such powerful AI that could make many software companies obsolete ! Interestingly, the winners in this paradox will be the companies who are deploying the AI capabilities and who will take revenues away from software companies due to the vertical integration of their business models. Or in other words the end client will need less software applications and will pay handsomely the likes of OpenAI, Anthropic, DeepMind etc. But, OpenAI is owned by almost 50% by Microsoft and DeepMind belongs to Alphabet, the shares of both companies having corrected amidst the general sell-off. It is going to be a nerve-racking year for investors in the Technology sector, this year.

What caught our attention

Last week's US labor market were rather weak. The JOLTS job openings fell by 386k to 6.5 million in December, while November was also revised lower. Job openings have now declined by roughly 1 million (12.9%) over the last 12 months and they are at the lowest level since 2022. In other news, US employers announced 108,435 layoffs for January, up 118% from the same period a year ago and 205% from December 2025, according to the outplacement firm Challenger, Gray & Christmas. This is the highest January total since the 2008 financial crisis, while at the same time, companies announced just 5,306 new hires, also the lowest January since 2009.

The ECB kept rates on hold at 2%, as expected, in a unanimous decision. It also reiterated that it will maintain a data-dependent, meeting-by-meeting approach and not pre-commit to a certain rate path. Ms. Lagarde repeated the mantra that monetary policy is "in good shape", but also "prepared to do what is necessary". Overall the conclusion is that the ECB is done with cutting rates as the Eurozone economic outlook looks brighter due to low inflation, low unemployment and the gradual rollout of public spending. Ms. Lagarde also said that solid Eurozone investment "is the big story".

Eurozone's January headline inflation fell to 1.7%, as expected. The 0.3% drop vs last month's figure was driven primarily by lower energy (-4.1% y/y). Core inflation also dropped to 2.2% and looking into the details, consumer services inflation was down 0.2pp to 3.2%, while consumer goods inflation was up 0.1pp to 0.4% y/y. All in all, the outlook for EU's inflation is benign.

Amazon shares fell by 20%, as the company announced a huge spike in its AI-related spending for 2026 to 200bn$. This represents a 50% rise vs. its 2025 capex spending, which also was 50% higher than the 2024 corresponding figure. The market keeps changing its mind whether relentless investment in AI will be spectacularly profitable or a severe dent on long-term earnings.

Bitcoin fell to a low of 60'000$ , which represents a 50% drop from its October 2025 high. The digital currency is already 20% down this year and it is trading back where it was in late 2024. What happens next is anybody's guess, but for now the "reddit and other blogs community", which is usually behind the extreme rise of Bitcoin and the likes, appears to be concentrated on Silver ...

Markets' reaction

Global equities continued to diverge as the Tech sell-off led Nasdaq down 2% and left the S&P500 with a small loss for the week (-0.1%) but the rest of the US market actually rallied (Dow Jones +2.5%, Russell 2000 +2%). In terms of sectors, Consumer Staples, Energy and Materials moved higher by more than 4% for the week, as all Tech-related sectors lost more than 2%. Europe moved higher by 1% for the broad indices, with Swiss stocks (+2%) outperforming. Consumer Staples topped the list with a 5% rally, just like in the US, with Energy (+2%) being also strong. Technology (-1%) underperformed in Europe too.

The bond market caught a bid, as equity volatility erupted. The weak US labor market data which came ahead of the January non-farm payrolls this week, also attracted buyers back into the market. The US 10yr yield fell to 4.20% before rising to 4.25% at the end of the week, while the German equivalent touched 2.80% before returning to 2.85%.

Precious metals were volatile again, but Gold outperformed, as we expected. The yellow metal has been supported by the 4600$-4700$ level twice already as buyers appear to come in at those levels. It managed to climb above 5000$ again. Silver reached a new correction low, close to 70$ before jumping again to 80$. It is still more than 35% off its recent peak. Platinum also rebounded from a low of 1900$ to trade above 2100$.

The dollar is stuck in a tight range, for now. The EURUSD has been trying to re-establish its upward trend after falling to 1.1750 during the precious metals sell-off. It has been creeping higher and it is now trading closer to 1.1850 again. The CHF continues to be strong, against the traditional January weakening. The EURCHF has remained below 0.92 and the USDCHF is still close to the record low.

Chart of the week:

US software companies' valuation at record low.

The above chart shows the valuation (forward Price-to-Earnings ratio) of the US Software ETF , which includes companies like Microsoft, Oracle, Palo Alto Networks, Salesforce and others. As one can see, the current valuation is just 20 times forward earnings, the lowest in more than a decade. During the pandemic era software companies were bought aggressively by investors and traders because our every-day life had morphed into a digital one, and their valuation had reached a bubbly P/E of 50 in 2021. Now , about 5 years later, we have moved to a total abandonment of the sector , as AI's fast rollout is poised to disrupt some or all of them. Whether the market is right , nobody knows. What we can say with certainty is that a position in the ETF , although tempting, might not be the best choice as the situation on who is going to flourish and who is going to disappear is still unknown. On the contrary, individual companies that have fallen victim of participating in this ETF/trade but have solid business plans and fundamentals, such as Microsoft, are definitely a buy. We increased our position to Microsoft on Friday.

Disclaimer

• The content of this document has been produced from publicly available information as well as from internal research and rigorous efforts have been made to verify the accuracy and reasonableness of the hypotheses used. Although unlikely, omissions or errors might however happen.

• The data included in this document are based on past performances and do not constitute an indicator or a guarantee of future performances. Performances are not constant over time and can be positive or negative.

• This document is intended for informational purposes only and should not be construed as an offer or solicitation for the purchase or sale of any financial instrument and it should not be considered as investment advice. The market valuations, views, and calculations contained herein are estimates only and are subject to change without notice. Any investment decision needs to be discussed with your advisor and cannot be based only on this document.

• This document is strictly confidential and should not be distributed further without the explicit consent of Kendra Securities House SA.

• Sources: Chart of the Week : KSH/FactSet