While ultrasonication is universally employed for dispersion and distribution of carbon nanotubes (CNTs) in a solvent or polymer solution, the current work focuses on the underlying mechanisms of CNT demixing and CNT damage that can occur during processing. Here, multi‐walled CNTs were dispersed in a polycaprolactone polymer matrix using an established solution processing technique. Electrical, rheological, and mechanical characterization results suggest that once nanocomposite property enhancements reach an optimal level, further sonication leads to a decrease in the corresponding properties due to a combination of CNT damage and demixing mechanisms. Evidence of CNT damage from transmission electron microscopy, poor CNT distribution from optical image analysis and shear‐induced crystallization results, and reagglomeration observed from ultraviolet–visible results, taken together, suggest that mechanisms of demixing and damage of the CNTs coexist for excessive sonication times.