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Hundreds of billions have vanished from the valuations of the largest companies in the world.

Technology giants are losing enormous amounts. Microsoft is roughly down 17 percent since the beginning of the year. Amazon is close to minus 14 percent. Sector ETFs are showing similar declines. And the big question hanging everywhere is this: could it be that AI will not deliver what we expected? Did expectations run too far? Did the market move much faster than actual profits?

SHIFT IN PSYCHOLOGY

The past few weeks have been full of what many call AI jitters. Not because AI disappeared. Not because innovation stopped. But because the market is starting to ask the obvious question: will all this massive investment in data centers, chips, infrastructure and AI agents ultimately deliver the profits that were promised? And if so, when?

For two years, investors were buying a vision. They were buying the future. They were buying the narrative that AI would change everything and that anyone not positioned would be left behind. Now the psychology is changing. The market is saying, that is all well and good, but show me profits. Show me cash flows. Show me return on capital.

The numbers are truly striking. Microsoft has lost about 613 billion dollars in market capitalization in just a few weeks. Amazon around 343 billion. Nvidia, Apple and Alphabet have also seen tens and hundreds of billions disappear from their valuations. And we are talking about companies that until recently were breaking one all time high after another.

Why is this happening? The concerns focus on three main points. First, whether AI can disrupt traditional SaaS style software models. If an AI agent can replace specific functions, what does that mean for companies built on subscription revenue? Second, rising competition. New tools, new models, new players. Third, enormous capital expenditures. Amazon, for example, announced that it expects investments to rise by more than 50 percent this year. We are talking about astronomical amounts. And the market is simply asking: when will I see a return on all this money?

And yet, at the same time, the money has not disappeared from the system. There has not been a mass exodus from the stock market. What we are seeing is rotation. Capital is moving away from stocks that were heavily pricing in the future and toward companies with more visible and immediate earnings.

TSMC, Samsung and even Walmart have seen significant increases in market capitalization. So the money is not being lost. It is moving to where earnings visibility is stronger. That is important to understand: we are not necessarily talking about a market collapse, but about a repositioning of capital.

And here is where it gets interesting. Citi conducted an analysis of software companies that have fallen sharply over the past month, while earnings estimates for the coming years have been revised upward. In other words, prices fell, but fundamentals improved. That is very important. If the drop had been driven by deteriorating fundamentals, we would be discussing something different. Instead, we are seeing a disconnect between price and expectations.

On that list are names such as Microsoft and Palantir. In fact, Microsoft is the worst performer among the so called Magnificent Seven this year and, despite that, several analysts consider it an opportunity. Some speak clearly of an overreaction by the market.

So what is really happening? Is the market overreacting? Is it more fearful than it should be? Maybe. Maybe not. Markets often swing from phases of excessive enthusiasm to phases of excessive fear. And usually, the truth lies somewhere in between.