Why AI spending is beginning to hit a 'speed bump'

July 9, 2026 - 17:47

Dan Niles, founder and portfolio manager at Niles Investment Management, recently appeared on a market analysis program to discuss what he sees as a growing slowdown in artificial intelligence spending. According to Niles, the rapid surge in AI investment is beginning to encounter resistance, which he describes as a "speed bump." He points to a shift in corporate behavior, where companies are moving away from what he calls "tokenmaxxing" practices -- a term he uses to describe the aggressive, often wasteful, use of AI tokens and resources without clear returns.

Niles argues that many firms are now pulling back from these excessive spending patterns. Instead, they are actively looking for ways to cut costs related to AI infrastructure and operations. This change comes as businesses face pressure to show profitability from their AI investments rather than just chasing the latest technology trends. The result, he suggests, is a more cautious environment where growth in AI spending may slow down noticeably.

This adjustment does not mean the end of AI's potential, but it signals a necessary correction. Companies are now prioritizing efficiency and practical applications over hype. For investors, this means paying closer attention to which firms can actually deliver value from AI, rather than betting on broad industry growth. Niles' warning serves as a reminder that even transformative technologies face periods of recalibration as the market matures.