February 27, 2025

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AI Industry Experiences Downturn Amid Innovation and Growth

The AI industry is experiencing a significant downturn, with many stocks plummeting in value. Despite this, some companies are making strides in the field, with innovative products and services being developed. In this news brief, we will explore the current state of the AI industry, highlighting both the challenges and the opportunities.

AI Stocks Plunging in Value

Investors have turned sour on the AI industry, with many expecting a decline in AI stocks for the past two years. However, AI companies have consistently proved bears wrong, delivering strong earnings and growth. Despite this, some AI stocks are experiencing a significant downturn, with 15 stocks having corrected the most so far this year. Rekor Systems Inc (NASDAQ:REKR) and TROOPS Inc (NASDAQ:TROO) are among the stocks that have seen a significant decline in value.

CS Disco, Inc. ("DISCO") (NYSE: LAW) has been named a G2 2025 award winner in the "Best Legal Software Products" category. DISCO's AI-enabled legal technology has been recognized for its ability to streamline e-discovery processes and provide advanced tools for legal professionals. The company's Cecilia AI platform has unveiled six new generative AI products and capabilities, giving attorneys a modern suite of tools to handle the growing complexity and volume of legal data.

AI Eager English Learners Drive Sales Beat

Duolingo's English learners have been more eager users of its artificial intelligence-powered features than learners of other languages, helping drive the mobile learning platform's sales beat for the fourth quarter. The company's new video-call feature has been used at a rate "a lot higher than folks learning other languages," its chief financial officer Matt Skaruppa told Bloomberg News.

AI Server Backlog Climbing

Dell Technologies Inc. gave a strong outlook for sales of servers optimized for artificial intelligence, though investors remained concerned about the profitability of these products. For the year ending in January 2026, Dell expects to ship $15 billion worth of AI servers, a 50% jump over the $9.8 billion it shipped in the fiscal year that ended Jan. 31.

AI Tariffs and Their Impact

While Trump's tariff plans are causing widespread market jitters, many AI companies are not shifting their long-term plans. Industry insiders say that tariffs are more of a blip than a strong headwind, and that companies are working to try to dodge the costs as much as possible. However, some analysts say that the tariffs could actually slightly hamper companies' efforts to maintain their lead in the AI industry.

AI Risks and Challenges

As more businesses use AI, legal risks are looming large. Local attorneys are advising businesses to slow down and consider their exposure to the many risks associated with the adoption of the technology. One major area of concern is data security, with many businesses surrendering sensitive data through user agreements with AI software providers.

AI and Inequality

New research reveals how artificial intelligence might reinforce inequality. The researchers challenge the widespread belief that AI-induced bias is a technical flaw, arguing instead that AI is deeply influenced by societal power dynamics. AI learns from historical data shaped by human biases, absorbing and perpetuating discrimination in the process.

AI Boom and Utilities Sector

The AI boom is driving growth in the utilities sector, with data center power demand forecast to increase rapidly. The Vanguard Utilities ETF tracks 69 U.S. companies in the utilities sector, providing exposure to electric utilities, multi-utility companies, independent power producers, gas utilities, and water utilities. The five largest holdings in the ETF are NextEra Energy, Constellation Energy, Southern Company, Duke Energy, and Vistra.

Key Takeaways

  • The AI industry is experiencing a significant downturn, with many stocks plummeting in value.
  • Despite this, some companies are making strides in the field, with innovative products and services being developed.
  • AI advancements in the legal industry are being recognized, with CS Disco, Inc. being named a G2 2025 award winner.
  • AI eager English learners are driving sales beat for Duolingo.
  • Dell Technologies Inc. gave a strong outlook for sales of servers optimized for artificial intelligence.
  • AI tariffs and their impact are being closely watched, with some analysts saying that the tariffs could actually slightly hamper companies' efforts to maintain their lead in the AI industry.
  • AI risks and challenges are looming large, with local attorneys advising businesses to slow down and consider their exposure to the many risks associated with the adoption of the technology.
  • AI and inequality are being studied, with new research revealing how artificial intelligence might reinforce inequality.
  • The AI boom is driving growth in the utilities sector, with data center power demand forecast to increase rapidly.

Sources

AI Stocks AI Advancements AI Eager English Learners AI Server Backlog AI Tariffs AI Risks and Challenges AI and Inequality AI Boom and Utilities Sector