Shares of website-building platform Wix (WIX 0.45%) dropped 16.4% in January, according to data provided by S&P Global Market Intelligence. Other than a buyback plan announced late in the month, there was no meaningful news driving the decline. Instead, persistent fears that artificial intelligence will wreck business models across the software industry are likely the culprit.
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AI is a real threat
While website-building tools are a dime a dozen, switching costs are incredibly high. Once a customer builds a website for their business on Wix's platform, moving that website is a disruptive, painful process that usually isn't worth the effort.
Wix is still performing well, with revenue rising 14% year over year in the third quarter of 2025. However, the writing may be on the wall. AI tools can build entire websites today, and as time goes on, those tools will only improve. If a Wix customer wants to free themselves from the platform, AI tools lower the switching costs.
Wix has jumped headfirst into this AI website coding trend by acquiring Base44, a tool that enables app creation with AI. Base44 had more than 2 million users as of November, and over 1,000 new paying subscribers join daily. The platform was expected to reach annual recurring revenue of $50 million by the end of 2025.
While Wix has a horse in the AI website builder race, it's not clear whether that business will enjoy meaningful switching costs or if Wix has any competitive advantage. There are quite a few similar tools available that are at least as popular as Base44, including Lovable.
A cheap stock, but be careful
Wix stock has plunged from its all-time high, down nearly 80% since peaking in 2021. Based on adjusted earnings, the stock looks cheap. With analysts expecting adjusted earnings per share of $6.73 for fiscal 2025, the price-to-earnings ratio is just 11.
NASDAQ: WIX
Key Data Points
While the valuation appears attractive, uncertainty is running incredibly high. How sustainable are the company's earnings as AI tools become more capable? You could imagine a Wix customer tired of paying premium prices using an AI tool to recreate a website on a different platform. If switching costs erode, Wix's profit margins will erode as well.
Website-building platforms like Wix appear to be at heightened risk of disruption from AI. Wix has built a highly profitable business, but the market is changing rapidly. The Base44 acquisition is helpful, but the jury is still out on how attractive that business will be in the long run, given the competitive landscape. Wix may look like a value stock, but investors need to be careful.
