Tech stocks managed to recover from losses incurred the previous day, following a report on virus research that warned of a grim future where unemployment could surpass 10% due to advancements in artificial intelligence.
The Nasdaq composite, heavily weighted with tech stocks, climbed over 250 points during midday trading on Wednesday, bouncing back from earlier sell-offs earlier in the week. Meanwhile, the S&P 500 saw an increase of about 50 points, and the Dow Jones Industrial Average also rose around 250 points.
This upward momentum mirrored gains from the previous day, especially after the Dow struggled on Monday. A lengthy essay released by Citrini Research on Sunday presented a hypothetical “scenario” concerning “the consequences of a global information crisis.”
The report envisages a future where AI leads to widespread job losses, predicting a 38% drop in the S&P 500 index by June 2028.
While this alarmist view seemed to unsettle investors, many economists and companies brushed it off as mere conjecture.
Pierre Yared, the interim head of the White House Council of Economic Advisers, referred to Citrini’s paper as “an intriguing piece of science fiction.” He remarked that the arguments within the report seemed to conflict with foundational economic principles.
Citadel Securities suggested that the current data offers little support for claims that AI advances will disrupt employment significantly.
“Throughout history, cycles of technological innovation have not only failed to lead to overwhelming growth but have also not rendered the workforce obsolete,” wrote Frank Fleit of Citadel in a memo addressed to investors.
In the unsettling scenario proposed by Citrini, white-collar workers would suffer drastically as they’d be “replaced by machines and pushed into low-paying jobs,” which could trigger a wave of defaults on loans and potentially lead to an economic disaster.
“This isn’t just a bear market; it’s more akin to apocalyptic fan fiction,” Citrini commented, emphasizing that the intent was to explore a relatively unexamined situation.
Nvidia, a prominent player in AI chip production, is set to announce its financial results after the market closes.
Despite the dire predictions laid out in the essay, it has intensified an existing undercurrent of anxiety in financial circles. Wall Street is increasingly worried about the costly nature of AI development and the potential returns for the private equity firms investing in this space.
The essay suggests, “As AI technology progresses, companies are employing fewer workers, white-collar layoffs are rising, and profit pressures are pushing firms to invest more in AI.” It’s a troubling cycle without apparent checks, it seems.
However, many tech CEOs have also expressed concerns about AI’s potential to disrupt the job market. For instance, Dario Amodei from Anthropic warned that in a worst-case scenario, unemployment could reach 20%, particularly affecting white-collar positions in sectors like technology, finance, and law.
Similarly, Alex Karp, CEO of Palantir, mentioned that AI would “upend” jobs in the humanities while encouraging career movements into typically blue-collar positions.
