This article first appeared on GuruFocus.

Morningstar analysts are warning that the AI narrative running through markets may be tilting more toward cost destruction than value creation. In a note Thursday, analyst Lochlan Halloway wrote that investors appear squarely focused on what artificial intelligence might eliminate, rather than the incremental value it could unlock. He pointed to cases such as Australian logistics software group WiseTech Global, where workforce reductions resemble patterns seen before AI became the headline justification. With earnings season under way and corporate guidance under tighter review, companies are increasingly being judged on how AI could reshape their cost bases and balance sheets, a dynamic that has fed what some market participants have described as an AI scare trade this month.

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The share price reactions have been decisive. WiseTech Global said it would cut 2,000 roles over two years, representing roughly 30% of its workforce, to secure AI-driven efficiency gains, sending the shares up 11% on Wednesday. In the US, Block (NYSE:XYZ) announced plans to reduce staff by more than 40%, driving the stock 23% higher in extended trading. For WiseTech, which remains early in its broader expansion story, Halloway suggested the announcement could reflect how management teams are framing cost reductions in 2026 as much as what AI is tangibly delivering today.

Despite the market's enthusiasm for automation-linked savings, Morningstar remains cautious. Halloway argued that companies could potentially create more durable value by redeploying employees into higher-value roles instead of eliminating them outright. He wrote that AI can, and probably will, disrupt the old way tech businesses operated, but added that large incumbents may be among those best positioned to capitalize on the shift and build tools that are not yet fully imagined. For investors, the key question may not simply be how many jobs are cut, but whether AI ultimately strengthens competitive positioning and long-term earnings power.

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