AI is indeed coming – but there is also evidence to allay investor fears | AI (artificial intelligence)
This month, investors’ message to the software, asset management, legal services and logistics industries is clear: AI is coming for your business.
The launch of new and ever more powerful AI tools has coincided with a stock market crash that has wreaked havoc on industries as diverse as pharmaceutical distribution, commercial property and price comparison sites. Advances in technology are lending increasing credibility to predictions that they could make millions of white-collar jobs obsolete or at least eat into the profits of established companies.
Carl Benedikt Frey, author of How Progress Ends and associate professor of artificial intelligence at the University of Oxford, says investors are reassessing the value of companies that rely heavily on selling software or know-how.
“AI is transforming once-scarce expertise into cheaper, faster and increasingly comparable output, tightening margins long before entire jobs disappear.”
Fears of widespread job losses powered by a viral article this weekWritten by AI entrepreneur Matt Shumer, titled: Something big is happening. In this document, Shumer purports to explain to the world outside Silicon Valley the future of new models for coding jobs and then “everything else” by comparing the current moment to February, just before the Covid pandemic.
The post was viewed 80 million times on X and triggered fear and anger; This includes those who say Shumer has a background in artificial intelligence. (He previously excited the internet announces Release of the world’s best open source model Negative.)
Shumer and the markets were reacting to the capabilities of recently released models such as Anthropic’s Claude Opus 4.6 and OpenAI’s Codex 5.3; Both were improved upon previous powerful AI products.
But there are other reasons for the current excitement; especially the companies that produce these models. AI “hyperscalers” (the term for major US tech players in this space) collectively plan to spend $660bn (£484bn) this year. This follows a year of massive, often cyclical deals between the world’s biggest tech companies.
But cracks have appeared in these figures, raising questions about what they actually mean. Nvidia and OpenAI recently canceled a $100 billion deal, replacing it with an as-yet-unknown, smaller commitment.
Meanwhile, other than OpenAI, xAI, or Anthropic, none of the AI model builders have a clear path to the massive revenue that would justify this expense; This year, revenue from the entire global software industry is expected to be just $780 billion.
It emerged this week that both arguments about AI (either that AI is an unsustainable boom or that it heralds a disruptive revolution in white-collar jobs) are being entertained by some investors, after shares in Google’s parent company Alphabet and Mark Zuckerberg’s Meta were hit by apparent concerns about a spending bubble.
Frankly, investors expect these companies to recoup their investment through the large number of individuals and businesses paying for their vehicles because they allow certain tasks and jobs to be done by fewer people or for fewer hours. Or, in economic jargon, a productivity boom.
“The two themes are inherently related but not necessarily contradictory,” says Jason Borbora-Sheen, portfolio manager at investment management firm Ninety One.
Investors initially supported spending by “hyperscalers” in the early phase of the AI gold rush. Borbora-Sheen says these concerns have now translated into cash burn and the size of investment required to remain competitive, while share prices of wealth managers and others are also being affected by the perception that AI “is here now, it will evolve and it can replace it”.
Companies have indicated that AI is influencing layoff plans, including British American Tobacco this week, but there has been no wholesale wave of cuts yet. Greg Thwaites, director of research at the UK think tank Solutions Foundation and associate professor at the University of Nottingham, says the evidence on the impact of AI jobs on major western economies is “quite uncertain so far”.
He says not all white-collar jobs will be affected; but AI can test the axioms around the old capitalist concept of “creative destruction,” which involves replacing obsolete jobs with entirely new ones, much like car mechanics replacing blacksmiths. Will AI be different because change is happening so quickly or because it will be good at absolutely everything?
He adds: “Some jobs will look very different quite quickly. But the idea that in a few years there will be groups of unemployed lawyers and accountants wandering around London strikes me as very difficult.”
Alvin Nguyen, a Forrester analyst, says the fears shaking the stock market are based on emotions, not evidence: No one has had time to evaluate the performance of an Opus 4.6-backed asset manager.
“This is a knee-jerk reaction,” he said. “How true is that? Look, there are a lot of leaders who initially thought, ‘I can replace humans with AI. And a lot of people acted on that. And I think one of the things that came out was, in most cases, no, it didn’t work.”
Aaron Rosenberg, a partner at venture capital firm Radical Ventures, whose investments include leading AI company Cohere, and former head of strategy and operations at Google’s AI unit DeepMind, says the impact of AI has been underestimated in the long term, but the adoption of breakthrough models will not be the same.
“History shows a recurring pattern where there is a significant lag between a technology working in the laboratory and its penetration into the broader economy, as well as a gap between early adopters and the majority of users,” he says.
Newer models will come; Other major AI deals could also falter. Meanwhile, there have been low-level voices of discontent from high-profile tech workers this month; There are many departures from AI companies for various reasons such as boredomConcerns about the AI disaster and the possibility of adult content on ChatGPT.
There is an angry, unfocused energy. As Borbora-Sheen says: “There is a strong dynamic of winners and losers.”
