To understand the difference in reversible energy storage capacity between the O3-type layered Na and Li compounds, we use first principles calculations to study and contrast the effect of two well-known destabilization mechanisms, transformation into the spinel-type structures and cation mixing due to transition metal migration. This study is performed on the layered oxides at the A0.5MO2 composition, where A = (Na, Li) and M is a 3d transition metal. We find that while all Li0.5MO2 compounds have strong driving forces and low energy kinetic paths to transform to the spinel structure, Na0.5MO2 compounds do not have thermodynamic driving forces to transform to spinel type structures. We also find that transition metal mobility is higher in Li layered compounds than in Na layered compounds because of the unusual activated state for transition metal hopping. For many compounds, migration goes along an oct–tet–oct path, but transition metal migration needs to be assisted by alkali migration into a tetrahedral site forming activated Atet–Mtet defects; substituting Na for Li in the layered structure results in increased transition metal migration barriers due to the larger size of Na+ ions. Overall, our findings indicate that Na compounds in the layered O3 structure have fundamentally different destabilization mechanisms to those of Li compounds. This distinction allows superior battery electrode performance in many Na compounds and offers optimistic perspective on finding many high energy density Na electrodes that cycle with stable high capacity.