Wall Street Has AI Psychosis
The AI Anxiety Epidemic: How Wall Street's Fear of the Future is Shaping the Present
As the world grapples with the rapid advancement of artificial intelligence (AI), one industry is particularly susceptible to the anxiety that comes with it: Wall Street. The financial markets are notorious for their volatility, but the recent surge in AI-related worries has sent shockwaves through the industry, with even the slightest hint of doom and gloom enough to trigger a mini-panic.
Last weekend, a blog post co-authored by Alap Shah, a 45-year-old financial analyst and tech entrepreneur, and the research firm Citrini, titled "The 2028 Global Intelligence Crisis," sent the Dow plummeting by 800 points. The report painted a picture of a flywheel in reverse, where AI agents take jobs from workers, leading to a sustained negative demand shock that forces the Dow down, down, down. While the report's predictions may seem dire, they are not entirely new or unprecedented. Tech leaders like Anthropic CEO Dario Amodei have already estimated that half the entry-level white-collar jobs will soon be gone, and earlier this year, Anthropic's release of new agentic tools spurred a Wall Street selloff.
The AI Future is Here, But Unevenly Distributed
The AI future is indeed here, but it's unevenly distributed. Those already living in the agent-packed, AI code-writing universe are experiencing both excitement and unsettling news. The news from those already living in the AI universe is that it's a mixed bag. On one hand, AI has the potential to revolutionize industries and create new opportunities. On the other hand, it also poses significant risks, including job displacement, increased inequality, and potential biases.
The Market's Reaction: A Perfect Storm of Anxiety
The market's reaction to the Citrini report was a perfect storm of anxiety. Critics climbed over each other to proclaim its flimsiness, pointing out that AI has had very little discernable impact on the economy so far. Others cited the long history of resilience after technological upheavals. A mocking response by the respected trading firm Citadel Securities read, "For AI to produce a sustained negative demand shock, the economy must see a material acceleration in adoption, experience near-total labor substitution, no fiscal response, negligible investment absorption, and unconstrained scaling of compute."
The AI Apocalypse: A Myth or a Reality?
The most withering critiques disputed the report's contention that much of the economy involves non-productive "rent-seeking" by middlemen and market makers, taking advantage of the laziness of the general population. When everyone has a few dozen AI agents working on their behalf, writes Shah, consumers will be able to effortlessly find the best goods for the best prices. Apps will be rendered unnecessary—just type what you want into the LLM and an army of agents will do everything for you. The "poster child" for this phenomenon, Shah says, is DoorDash. Instead of being limited to the restaurants on the app, consumers will send out AI agents to find their ideal meal options, contracting directly with restaurants and delivery people—no apps needed. Zero friction!
The DoorDash Defense: A Spirited Response
Not surprisingly, people at DoorDash did not appreciate this. "We were trying to rationalize—why? Why did they call us out more than anyone else?" says spokesperson Ali Musa. DoorDash, he says, is already navigating the world of AI with some success. "We've been doing these partnerships with the LLMs and other [AI] services for several quarters now, and the business continues to grow." Musa pointed me to tech pundit Ben Thompson's spirited defense of his company. In his well-respected Stratechery newsletter, Thompson called the report "a compelling narrative that, under the slightest bit of scrutiny, failed to make any sort of economic sense." (This triggered an amusing exchange between Thompson and Shah on X.) DoorDash, Thompson explained, built a service that AI agents can't match, with trusted delivery people, refunds, and regulatory compliance.
The Future is Uncertain, But One Thing is Clear: AI is Here to Stay
We'll have to wait until 2028 to see who's right about AI and the economy. Maybe, as Shah suggests, society can take action to forestall the crisis. Shah tells me he's planning to drop a sequel in the next few days with suggestions that could help the apocalypse land softly. "We clearly need some very reasonable policy prescriptions so that the jobs go away very slowly," he says. Does he expect the market to react to this more upbeat take with an uptick in prices? "I don't think so," he says. The market responds, he laments, "Only to the bad stuff."
The Nvidia Effect: A Perfect Example of the Market's Reaction
It didn't take long for Wall Street to prove Shah right. A few hours after our conversation, Nvidia announced spectacular earnings—good news for Shah, whose own portfolio is hedged against the apocalypse with major holdings in the chipmakers and, apparently, short positions on companies he sees as disruptees. But while CEO Jensen Huang crowed of a 73 percent leap in revenues, extending a string of fantastic quarters, investors sought reasons to extend their persistent qualms about AI. At the next day's open, Nvidia stock was down 5 percent.
Conclusion: The AI Anxiety Epidemic is Here to Stay
The AI anxiety epidemic is a perfect storm of fear, uncertainty, and volatility. While the market's reaction to the Citrini report may seem extreme, it's a perfect example of the anxiety that comes with the rapid advancement of AI. The future is uncertain, but one thing is clear: AI is here to stay. As we move forward, it's essential to have a nuanced understanding of the risks and opportunities that come with AI. By doing so, we can work towards a future where AI is harnessed for the greater good, rather than contributing to the anxiety and uncertainty that plagues us today.
Source: https://www.wired.com/story/wall-street-has-ai-psychosis/
