AI's Muted Impact On Jobs
“We are all foolproof and incapable of error.” - HAL 9000
One of the biggest fears about artificial intelligence is the potential for it to replace workers en masse.
Well, that, and it becoming sentient and declaring war on humanity like Skynet from Terminator.
According to a recent poll from Gallup, a staggering 79% of Americans think AI will result in a reduction in the number of jobs available in the next 10 years.
To add fuel to the fire, there were headlines about tech companies like Block slashing 50% of its workforce and blaming AI.
Headlines like that are the reason the worry rate is 79% and not 30%.
What if everyone is wrong?
What if it results in people being more productive and more jobs being created?
So far, the job market hasn’t just held steady. It has improved.
Since March, the unemployment rate has fallen from 4.4% to 4.2%.
And last week, the fewest number of people filed an initial claim for unemployment insurance in the last 20 years.
The optimistic view is that AI will be adopted like every other tool and technology in our history, allowing us to be more efficient workers while opening up previously unimaginable job opportunities.
I’ll take the optimistic angle as long as the data support it (but I reserve the right to panic if I see a humanoid terminator on a chopper).
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Chart Of The Month
What caught our eye?
In a sea of charts and data, everything tends to blend together.
This chart stopped me dead in my scroll.
The race to become the AI leader is prompting the so-called “hyperscalers” to spend all of their cash, and then some.
Quick analogy: think of a hyperscaler like a prospector in 1849 heading west to strike it rich. The semiconductor companies sell the picks and shovels.
Except instead of having thousands of customers searching for gold, the modern picks-and-shovels companies have a handful.
The massive spending by the hyperscalers has caused the stock market to take notice.
Year-to-date, Meta is down 18%, and Microsoft is down 6%.
Alphabet (aka “Google”) just announced that it spent more cash than it took in last quarter, and its shares were swiftly punished in the open market.
Meanwhile, the chip stocks are quite literally striking it rich.
Micron is up 200%.
Applied Materials is up almost 100%.
To me, this feels unsustainable...on both sides of the trade.
At some point, the hyperscalers could assess the situation and think twice before writing that next check. Or they could look to build their own picks and shovels.
I’ll be watching to see who benefits from the next phase of this technology revolution.
Stay tuned.
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