Public markets have moved decisively into a "fear trade," with travel and hospitality tech shares down ~25% and materially underperforming their end markets. Two forces are driving this: (i) concerns around AI-driven disintermediation, a long-term secular shift, and (ii) escalating geopolitical risk tied to the conflict in the Middle East, a near-term exogenous shock whose implications are still unfolding. Concerns about AI compressing traditional code-based moats have been compounded by macro uncertainty and travel disruption risk, and we are increasingly seeing companies cut engineering headcount as AI replaces human development capacity, "Level 5 Dark Code Factories," where LLMs convert specs directly into code with no human intervention, are becoming a reality for certain platforms.
There is no question that AI is fundamentally reshaping the competitive landscape. Development timelines have compressed significantly, the unit of account has shifted from months to hours, or in some cases minutes. This is compressing differentiation for feature-led platforms and challenging traditional views on defensibility.
That said, we believe public markets are trading on fear rather than fundamentals. The current sell-off is not distinguishing adequately between businesses with shallow, replicable feature sets and those with durable moats, driven by proprietary data, system-of-record ownership, embedded workflows, and deep customer relationships. In our view, these assets are not only insulated from AI disruption, but in many cases positioned to be primary beneficiaries.
Private markets, by contrast, remain open. Activity is tracking ahead of 2025, itself a record year, with deal volume up on a run-rate basis and continued strong engagement from both sponsors and strategics. Investment committees are more disciplined, but high-quality assets with strong growth, scalable margins, and high retention continue to command premium outcomes, particularly those with a credible and actionable AI strategy.
To help frame this environment, we have included our perspective on how investors are evaluating AI's impact on valuation, across both defensibility and offensive execution. The gap between leaders and laggards is widening quickly.
As always, please don't hesitate to reach out if it would be helpful to discuss how this is impacting your business or strategic options.
© In the U.S., America’s Growth Capital, LLC dba AGC Partners, member FINRA/SIPC. In Europe, America’s Growth Capital Europe, LLP (Appointed Representative Alternatives St. James, LLP which is authorized and regulated by the Financial Conduct Authority). America’s Growth Capital Europe, LLP is a Limited Liability Partnership incorporated in England and Wales (OC368580). Its registered address is 6th Floor, 9 Appold Street, London EC2A 2AP. The testimonials contained herein may not be representative of the experience of other customers or clients. Testimonials are no guarantee of future performance or success. Deals marked with an “*” are non-AGC deals.
