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This futuristic Research Report from June 2028 got Wall Street scared a few days ago. It predicts that AI will cause massive disruption and displacement in the economy which will lead to a terrible market decline.
It’s very scary reading not for the faint of heart.
Personally, with national debt at $38 trillion, I worry more about a looming debt crisis than AI.
What is your take on either of these topics? What are you worried about? A debt crisis or disruption to the economy by AI?
AI is disruptive so it will influence companies. We see that today as there is a shift in interest underway from the hardware suppliers to the software companies that are involved in the AI industry.
The market has been overpriced. It doesn’t take a genius to say that there will be a correction. In the present circumstances, when a market correction does occur, it can be large. But not always.
As for AI, it is likely that certain jobs will be eliminated while others are modified. A few will be transformed. As for “massive” disruptions, who knows? Which jobs, how soon, etc. This cannot be predicted with any real accuracy. However, if one is inclined to hype the stocks, then by all means, use words such as “massive” when describing the changes.
As usual, a well-diversified portfolio is probably the investor’s best defense. Currently, foreign stocks (Ex-U.S.) are once again in vogue as some investors chase better returns. There is also a renewed interest away from large caps. As for AI, some companies will get rich off of this, while others are absorbed or go out of business entirely. Mr. Grossman’s article “Managing Investment Risk” points to the folly of investing in things we don’t understand. I’d add that chasing results isn’t a good strategy, either.
I don’t put much stock into the gurus who think they can predict the fallout of this. At one end we have the utopia believers who say we’ll work far fewer hours per week (and perhaps earn far less per year). At the other end of the spectrum are the doom sayers.
I’m reminded of all of the changes anyone born in 1900 experienced before their retirement at age 65 including: WWI, the flu epidemic, the great recession and depression, WWII, the polio epidemic, the recessions after WWII, the Korean war, possible nuclear Armageddon, multiple stock declines and several “lost decades”, etc.
Ross Perot comes to mind a lot these days.
Debt crisis, it won’t go away by its self.
I’ve read several articles that AI isn’t as smart as people think it is. You also can’t trust it to tell the truth. As long as AI contains self modifying code you can’t make it follow any rules. However it can be useful as long as you’re careful.
I recently used AI to find a US customs code for something I was buying from Israel. I had done some research before I asked my question so I had a general idea what it might be. The first answer was almost right on, but when I asked it the same question again a few times, to see if I would get the same result, it started drifting further and further off track.
On the other hand I had a subscription to satellite radio that expired. I was able to bargain the chat AI down to $6 a month for a year. The next day I received their final renewal offer in the mail for $8 per month. My brother did even better at $4.
I’ll take the debt crisis, please.
AI will help us all, but we have to insure it works mostly on what I call the Right things. No one can predict the market, right, so I say no one can predict AI. Sure there will be BIG changes, we all just saw what Dorsey is doing at Block Inc. shrinking the workforce by 1000’s. Somehow life will go on and we will absorb AI into the workplace. Remember, people thought email would replace mail, paper copers would not be needed with PDF’s etc. I do worry about the National Debt for our Grandchildren. Life keeps going on, but we all have to learn to accept more and more change. The question is will Life be better!
Citadel Securities has an analysis of the expected impact of AI on the economy that challenges many of the disruptive theories. Read about it here: https://www.citadelsecurities.com/news-and-insights/2026-global-intelligence-crisis/
Very good read. Thanks
AI has already affected your investments. Over the last 18 months, at least 50% of your equity positions’ growth has derived from the outperformance of AI-related stocks. As Job once observed, the Lord giveth and the Lord taketh away; in the investment world, the Lord’s name is NVIDIA along with its band of followers.
“As Job once observed “. For a second, given the subject of the article, I thought you were quoting Steve Jobs.🤣
Well… that amused me no end lol
Nick,
My philosophy on this is the same as Alfred E. Newman’s “What me worry?”
I first voted for Bob Dole in the NH primary in 1980 because his primary concern was the national debt, then at 908 billion. Last year the BUDGET DEFICIT was nearly 1.8 trillion. Now the total US debt is 38 trillion.
Long ago I gave up worrying about the US debt. There is nothing I can do about it. It doesn’t matter who I vote for in congress or for president when it comes to this issue as neither party is interested in the topic. I am willing to bet that in the 2028 primary in NH I will not hear a peep out of the candidates of either party on this topic, and if I do it will only be lip service.
So based on the above I will waste no time worrying about something I have absolutely no control over.
How will it affect my portfolio decisions?
Not one bit. I will continue my plan of having a broadly diversified portfolio of index ETFs within my target allocation and what will happen will happen. This may sound self centered but it’s likely I will never face the consequences, but again there is nothing I can do about it.
I spent 44 years in IT and most of that time was as the senior executive of large IT organizations. I saw a lot of change over the years, and I believe AI will be the most disruptive change I have seen.
In my simple way of thinking, I believe it will result in much higher productivity which will require fewer workers. Will companies reduce their work force or redeploy unneeded workers to other tasks or projects. Probably some of both. What I have seen in the past is new jobs were required to better manage the new technology. Workers who embrace AI and learn how to use it effectively will have the edge in the work force.
I have used AI for my own research and have been very impressed with its ability. I recently had a medical issue, and several tests were done. The tests showed a mixture of good and bad results which were confusing to me. I was unable to see the doctor for a while, so I used AI to analyze my results. I was very impressed with its analysis and conclusions. This was a complex medical issue, and AI gave me more detail about it than I will ever get from my doctor. It also framed questions I can ask the doctor to get the best response.
The biggest challenge in large IT projects I oversaw was documenting and streamlining business processes, and automating as much of that as was practical. AI may help with that, but I still see that as mostly a people process. I could be wrong because I have been retired for 15 years. However, organizations are usually comforted by having a human expert guide them through complex business and technical matters.
Very thoughtful Jerry. Your comments about help with a difficult medical issue resonate with me as I’ve heard of friends getting the same benefit from AI.
I worked as an embedded software engineer in both the industrial automation and automotive sectors. I never had the opportunity to use the neural networks that current AI is based on but did implement some clever self-adjusting “learning” algorithms over the years.
I just finished watching the 12-lecture “Understanding Artificial Intelligence” by professor of philosophy Dr. Patrick Grim on Great Courses streaming, which I highly recommend.
I am more concerned about the national debt than Artificial Intelligence (which I think should more correctly be called Simulated Intelligence).
The national debt issue is a political issue and in the current anti-tax environment cannot be solved. Only when honest and forthright politicians are voted into power in both legislative and executive branches will this issue be addressed.
Artificial Intelligence does now and will increasingly disrupt our relationship with work. What is new this time is that it is not just those who perform physical labor but also those who do intellectual labor are affected.
The AI promise: The decoupling of economic productivity from the number of hours of human labor input.
This started with the industrial revolution, mass production, and accelerated with electronic control systems (automation) used in modern manufacturing. The combination of advanced sensor technology with AI logic will expand the impact to all areas of human labor, from research scientists to agricultural field workers.
I am not concerned about the doomsayers talk about an “AI singularity” where the AI becomes smarter than us biological intellects and decides we are not needed.
The affect of AI that that is concerning is how our society will respond when all of our material needs can be satisfied with much, much less labor than is currently used. Will our political and economic systems be able to adjust so that everyone wins?
“Only when honest and forthright politicians are voted into power in both legislative and executive branches will this issue be addressed.”
My Simple three word reply:
WE ARE DOOMED!
I agree with majority of what you wrote. As I stated, I’m more concerned about the debt than AI but I am worried that the hundreds of billions of investment in AI will not generate the revenue the stock market wants.
I have recently completed reading the 2025 book “Coming Into View: How AI and Other Megatrends Will Shape your Investments.” written by Joe Davis, Vanguard’s Global Chief Economist.
One of the of the four megatrends Dr. Davis writes about in the book as one of the other megatrends besides AI is the US debt and fiscal deficits.
If you want to hear a podcast about the book Rick Ferri in the 86th edition of Bogleheads on Investing in September 2025 interviewed Joe Davis discussing Coming into View.
Thanks for this.