Tech stocks clawed back losses from a day-earlier rout over a viral research report that warned of a dystopian future in which artificial intelligence causes unemployment to surge above 10%.
After selling off earlier in the week, the tech-heavy Nasdaq index surged more than 250 points in midday trading Wednesday. The broad-based S&P 500 was up about 50 points, while the Dow Jones Industrial Average also rose about 250 points.
Those gains were similar to a day earlier after the Dow dropped more than 800 points on Monday following a 7,000-word essay, published on Sunday and billed by Citrini Research as a hypothetical “scenario” about the “fallout of the Global Intelligence Crisis.”
The report envisions a future in which AI has prompted mass layoffs and a 38% plunge in the S&P 500 by June 2028.
While the AI doomsday prediction clearly struck a nerve with investors, several prominent economists and firms dismissed it as nothing more than conjecture.
Pierre Yared, the acting chair of the White House Council of Economic Advisers, said Citrini’s paper was “an interesting piece of science fiction.”
“I think that if you really look at it, and think long and hard about it, it violates some of the basic accounting in economics,” Yared said, according to Bloomberg.
Elsewhere, Citadel Securities argued that there is little evidence in current data to suggest that AI advancements will crush the labor market.
In the past, “successive waves of technological change have not produced runaway exponential growth, nor have they rendered labor obsolete,” Citadel’s Frank Flight wrote in a note to investors.
In Citrini’s nightmare scenario, white-collar workers are hit especially hard as they “lost jobs to machines and were forced into lower-paying roles,” leading to a wave of mortgage and private-equity loan defaults that acuse the economy to crumble.
“This isn’t bear [market] porn or AI doomer fan-fiction,” Citrini wrote. “The sole intent of this piece is modeling a scenario that’s been relatively underexplored.”
AI chip supplier Nvidia, a crucial bellwether for the tech sector, is set to report earnings after the bell.
Even with Citrini’s caveat, the essay helped fuel an undercurrent of panic on Wall Street, which has grown increasingly concerned about the sky-high costs of AI development and whether the various private equity firms with bets in the sector will ever see a return on their investment.
“AI capabilities improved, companies needed fewer workers, white collar layoffs increased, displaced workers spent less, margin pressure pushed firms to invest more in AI, AI capabilities improved,” the essay said.
“It was a negative feedback loop with no natural brake. The human intelligence displacement spiral,” it added.
However, several prominent tech CEOs have also warned that AI was likely to drive some upheaval in the job market.
Anthropic boss Dario Amodei warned last year that in the worst case scenario, unemployment could swell to 20%, with white-collar jobs in tech, finance and law hit especially hard.
In January, Palantir CEO Alex Karp said AI “will destroy” jobs in the humanities while boosting vocational career paths that are typically categorized as blue-collar.
