Citrini Research AI Scenario Triggers Wall Street Panic Over Unemployment and Economic Collapse

How AI agents could destroy the economy

On Sunday, an analyst group called Citrini Research published a remarkable piece illustrating how agentic AI could bring on mass economic destruction over the next two years. The scenario imagines a report from two years in the future, in which unemployment has doubled, and the total value of the stock market has fallen by more than a third. As the report puts it: 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... It was a negative feedback loop with no natural brake...The system turned out to be one long daisy chain of correlated bets on white-collar productivity growth. It's a new kind of bear case, focused not on Skynet-style misalignment but on the gradual unspooling of the economy itself. In particular, the Citrini scenario looks at the implications of integrating AI agents into the economy at large, and what it would mean when outside contractors get replaced by cheaper in-house AI. It's similar to the Death of SaaS scenario, but Citrini goes further, implicating any business model that involves optimizing transactions between companies. As you might expect, the report is causing quite a stir online. Not everyone is buying it -- even Citrini describes it as more of a scenario than a prediction -- but it's not so easy to name the specific point where you think the scenario goes wrong. Personally, I'm not sure companies are ready to hand off purchasing decisions to AI agents, no matter how smart they are. But in Citrini's scenario, most of the impacted decisions have already been handed off to third-party contractors, so it's not quite as implausible as it seems.

Wall Street Has AI Psychosis

Before last week the name Alap Shah didn't ring a bell for many people. The 45-year-old financial analyst and tech entrepreneur had spent the past two decades working in relative obscurity. Then last weekend he coauthored a blog with the research firm Citrini titled "The 2028 Global Intelligence Crisis." It was a "thought exercise" about the impacts of artificial intelligence, and it predicted that in June of that year, AI would jack up unemployment past 10 percent and force the Dow down, down, down. Writing in a confident, Nostradamic tone -- as if auditioning for starring roles in the next Michael Lewis book -- the authors painted a picture of a flywheel in reverse: AI agents take jobs from workers, people spend less, and struggling corporations conduct layoffs on top of layoffs. There wasn't much in it that hadn't been previously heard, or speculated about. 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. Nonetheless the report hit with the force of the blizzard blowing through lower Manhattan. When the closing chimes sounded on the New York Stock Exchange, the Dow was down 800 points. The name Alap Shah was now ringing bells. The achievement is less impressive than it seems. Wall Street, like the rest of us, is in a persistent state of anxiety about AI, and it doesn't take much to trigger a mini-panic. Financial markets don't necessarily map to reality, but the jitters reflect a wider disquiet. The AI future is in a William Gibson zone -- it's here, but unevenly distributed -- and the news from those already living in the agent-packed, AI code-writing universe is both exciting and unsettling. Emphasis on unsettling. No one -- no one! -- knows exactly how AI will impact the economy, but clearly it will be significant. Right now stocks are soaring, so it seems to make sense to keep the party going. But then along comes the latest doom manifesto, or a paper indicating that a traditional business sector might be threatened by AI, and suddenly money managers are reminded that the biggest issue of our time is totally unresolved. Case in point: earlier this month, a tiny company (valuation under $6 million) that had previously sold karaoke machines pivoted to AI-powered shipping logistics and put out a report saying that it had discovered some efficiencies in loading semi-trucks. That was enough to erase billions of dollars from the share prices of several major logistics companies, none of which had karaoke experience. After it did its job on Wall Street, the Citrini report came under considerable fire. Critics climbed over each other to proclaim its flimsiness. For one thing, they pointed out, 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 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 DoorDashes of the world are avocado toast!

Wall Street Doesn't Know What to Think About AI Anymore

Over the past year or so, Wall Street has gone through waves of AI-related selloffs, sparked by fears about everything from more cost-efficient competition in China to the likelihood of a looming AI bubble. This week's market dip may have been the first partly caused by a self-published work of fiction. Citrini Research, a lesser-known investment research firm, published a lengthy blog post on Sunday titled "The 2028 Global Intelligence Crisis." In it, the researchers imagine a scenario two years from now when extremely capable AI agents have replaced vast swaths of white-collar jobs, wiping out consumer spending and pushing the global economy into a deflationary spiral. Uber, DoorDash, Mastercard, Visa and other firms namechecked in the blog soon saw their stocks tumble as investors digested the dystopian scenario. Some mainstream economists, meanwhile, were quick to pan Citrini's report, with the acting chair of the White House Council of Economic Advisers, Pierre Yared, dismissing it as "science fiction." The reaction was the latest, and arguably most extreme, indication yet that Wall Street is struggling to wrap its head around the trajectory for AI. For months, public market investors have worried that the technology won't be lucrative enough to offset the massive development costs. Now, there's growing concerns that AI will be so disruptive that it upends countless software providers and businesses. In recent weeks, numerous sectors have been shaken by a series of largely incremental AI product releases, whether it be an AI-powered tax tool from a smaller wealth management startup or an AI logistics offering from a tiny former karaoke company. The mere mention of a company's name during a livestreamed Anthropic event this week was enough to move stocks. "It just taps into how fragile the investor sentiment is right now. There aren't a lot of strongly held convictions out there," said Heath Terry, global head of technology and communications research for Citi, speaking after the Citrini post. "All it takes is somebody to put together a doomsday scenario and it's enough to shake some people out of their positions in this kind of environment." The Citrini authors said they intended to be provocative as a call-to-action for investors, tech leaders and policymakers. "It feels like in society right now, there is a sort of existential dread around what's happening with AI," said co-author Alap Shah, a former Citadel staffer. "This essay was an opportunity to put a scenario out there that would galvanize folks a little bit," said Shah, who now runs AI firm Littlebird and is an executive at Lotus Technology Management. Despite the nightmare scenario laid out in his piece, Shah said "software business won't erode overnight." He also professed his belief that "the Street tends to get it right" in the long-term. To some extent, the current uncertainty on Wall Street reflects the mixed messages coming from Silicon Valley and the wider business community. For years, tech leaders have signaled AI is progressing rapidly and framed it as a transformational technology that will reshape large portions of the global economy. Anthropic Chief Executive Officer Dario Amodei has said AI will wipe out half of all white-collar jobs in the next five years. Not to be outdone, Microsoft head of AI Mustafa Suleyman recently predicted AI can replace most white-collar work in the next 12 to 18 months. (Others, like OpenAI's Sam Altman, have expressed optimism that young people will find newer, exciting jobs due to AI.) In the near term, however, AI's impact is murkier. Multiple studies last year found employees were using AI to produce "workslop," undercutting productivity rather than boosting it. Leading AI labs are also still working to help businesses understand how best to use their tools. OpenAI Chief Operating Officer Brad Lightcap said this month that the world "has not yet really seen enterprise AI penetrate enterprise business process." Anthropic and OpenAI have found meaningful traction selling AI agents to software developers to speed up the process of writing and debugging code. Much of the market turbulence at the start of this year is built on an unproven assumption that agents are just as well-positioned to streamline work across other industries, from legal to finance. "One of the biggest mistakes people are making is that we're extrapolating the success in coding out to everything else," Terry said. Coders are typically early adapters of technology, whereas workers in other industries may be more reluctant to embrace AI as quickly. And though it's relatively easy to check if AI-generated code is indeed working or broken, it can be a lot harder for businesses to verify the quality of the output in industries like consulting or legal. The top AI labs have tried to keep a balanced tone. OpenAI's Lightcap said in September that "everyone is going a little crazy," with regard to stocks moving on mentions of partnerships. More recently, Kate Jensen, head of Americas at Anthropic, said the market gyrations are "a reaction in large part to just how fast the industry is moving and how quickly the technology is getting better and better." But she said it's important to remember that legacy software companies can benefit from building on top of Anthropic's technology. Among Wall Street investors, however, the current imperative seems to be: better safe than sorry. "People see the direction that this is going in and they want to get out of the way before it runs them over," Terry said.

Skittish investors spooked as dystopian AI outlooks go viral

SINGAPORE, Feb 24 (Reuters) - An imagined dystopia of mass unemployment fuelled by artificial intelligence, highlighted in Citrini Research's now viral report, has unsettled global markets, where a recent huge bet on the technology is starting to show cracks. The report, the latest in a series of gloomy "think pieces" on the disruptive potential of AI, envisions a 2028 scenario where unemployment rises to 10.2%, triggered by layoffs as AI rapidly turfs out software and delivery applications. This hypothetical downturn, compounded by mortgage and private-equity loan defaults, could send shockwaves through financial systems, sending U.S. stocks tanking, stalling credit markets and the broader economy. The Citrini report has struck a chord with markets unnerved by AI's potential negative impact. Investors have dumped the shares of software companies and those in sectors vulnerable to automation. The U.S. software shares index is down 24% so far this year (.SPLRCIS), opens new tab. "AI capabilities improved, companies needed fewer workers, white collar layoffs increased ... it was a negative feedback loop with no natural brake," Citrini report author Alap Shah wrote. Similar big-picture concerns ran through blogs have circulated among investors this month - one by Matt Shumer, the CEO and co-founder of AI firm Otherside AI - about the scale of AI's disruptive power. Shumer says the impact of AI could be "much bigger" than the 2020 COVID crisis that upended everything from global supply chains to the labour force and education. Damien Boey, portfolio strategist at Wilson Asset Management in Sydney, noted that the market remains uneasy as it juggles cyclical signs of potential gains in risk assets against possible shock unreflected in conventional macro trends. "The Citrini piece has struck a nerve in this regard," he added. WINNERS AND LOSERS EMERGE While global equity markets remain near record highs, this masks a massive rotation out of many AI-exposed companies into either defensive stocks or the profitable corners of the supply chain. Since peaking last October, the S&P 500 software and services index is down more than 30% while Asia's chip-making giants have soared. TSMC (2330.TW), opens new tab is up 30% over the same period and shares in South Korea's Samsung Electronics (005930.KS), opens new tab and SK Hynix (000660.KS), opens new tab have doubled. "AI is real...the divergence is real and the sell off in (software) makes sense as AI will force software coding to go to zero," said Christopher Forbes, head of Asia and Middle East at CMC Markets. "Those in the supply chain will win - chips, data centres, permanent energy." The next test for markets comes with AI bellweather Nvidia's (NVDA.O), opens new tab Wednesday earnings. EXPERTS URGE MEASURED RESPONSE Others stressed that as fear dominated, the positives of AI for the global economy were overlooked. "I would take it seriously, not literally," said Nick Ferres, CIO at Vantage Point Asset Management, who said criticism of the Citrini report, for underplaying the economy's ability to adapt, was also valid. In his piece, Shumer noted that the "single biggest advantage" workers could gain is to act early both in terms of understanding and adapting to AI. In another piece dated Feb 17, the CEO of financial software and data firm ION Group, Andrea Pignataro, said markets should not panic over whether AI will replace software tools, but instead panic over what happens when institutions discover they have been teaching AI "to play without them." "So far this year, the stock market has been discounting a scenario in which AI is our Frankenstein monster," said Ed Yardeni of Yardeni Research. "We continue to believe that AI is augmenting workers' productivity rather than making them extinct." Reporting by Tom Westbrook; Additional reporting by Gregor Stuart Hunter in Taipei; Writing by Dhara Ranasinghe; Editing by Amanda Cooper and Andrei Khalip Our Standards: The Thomson Reuters Trust Principles., opens new tab * Suggested Topics: * Artificial Intelligence Tom Westbrook Thomson Reuters Tom reports from Singapore on financial markets in Asia, filing daily market reports and deeper pieces on stock, bond and foreign exchange trade. He contributes to the Morning Bid newsletter. He was previously a company and general news correspondent in Sydney and a reporter for News Ltd.

Citrini's Dystopian AI Vision Draws Global Investor Criticism

The idea from Citrini Research that artificial intelligence will trigger widespread unemployment is prompting a global backlash from investors and economists. In the past few days, experts from Citadel Securities, Deutsche Bank AG, Fidelity International, Liontrust Asset Management Plc and others have said the thesis is far-fetched at best, with a top White House economist even calling it "science fiction." Citrini itself has cautioned against taking the report too literally, writing in the second sentence of the 7,000-word Substack post that "what follows is a scenario, not a prediction." Still, even as a thought experiment, the doomsday narrative has taken Wall Street by storm this week and triggered more losses in software and financial stocks. With investors already edgy about the power of AI tools, the report added fuel to the fire with its vision of a world where AI causes mass white-collar layoffs, a stock-market collapse and drives the unemployment rate above 10%. In particular, critics have zeroed in on Citrini's thesis that AI will cause a negative feedback loop, dubbing it a "human intelligence displacement spiral," in which companies invest in more AI and fewer workers. Since those laid-off workers aren't spending as much, the pressure of profit margins causes companies to adopt even more AI, and then cycle repeats. Clare Pleydell-Bouverie, LionTrust fund manager, discusses market concerns following a report by Citrini Research. Some of the market anxiety caused by Citrini is already easing. Nasdaq futures are pointing to a 0.4% advance when US markets open, which would add to Tuesday's 1.1% rally. The rebound in global stocks was helped by comments from Anthropic PBC, which said it plans to build partnerships -- suggesting that its Claude chatbot will integrate with, rather than displace, existing businesses. Get the Tech Newsletter bundle. Get the Tech Newsletter bundle. Get the Tech Newsletter bundle. Bloomberg's subscriber-only tech newsletters, and full access to all the articles they feature. Bloomberg's subscriber-only tech newsletters, and full access to all the articles they feature. Bloomberg's subscriber-only tech newsletters, and full access to all the articles they feature. Bloomberg may send me offers and promotions. Plus Signed UpPlus Sign UpPlus Sign Up By submitting my information, I agree to the Privacy Policy and Terms of Service. According to Citadel Securities, current data show little sign of widespread AI-driven labor disruption, citing surveys from the St. Louis Fed and labor market indicators. Job postings for software engineers -- a field seen as vulnerable to automation -- have jumped in recent months, and construction hiring appears to be picking up, supported by a boom in AI-related data center projects, wrote macro strategist Frank Flight in a report. Instead of replacing human workers, "it seems more likely that AI will be a complement" for labor in many areas, similar to past technological revolutions, he said. "To frame this debate correctly, one can simply ask: was the advent of Microsoft Office a complement or a substitute for office workers?" Flight added. That's a view echoed by Clare Pleydell-Bouverie, co-head of the Liontrust Global Innovation team. New technology will eliminate some jobs, but also create new ones, she said. "In Silicon Valley right now, there are new jobs that didn't exist two years ago. Prompt engineers, interference optimization experts. So we do think that there will be some good news in this as well," she added. One of the problems with Citrini's vision coming true is that human interaction may be critical in a lot of jobs, essentially giving non-AI businesses a competitive advantage, according to Krishna Guha, head of central bank strategy at Evercore. As well, there are limits on how fast AI can expand given the energy constraints, he said. "Even if the tech and microeconomics were to evolve in line with this scenario, it is highly unlikely that the macro would, as this would require a set of extreme and improbable conditions to hold," Guha wrote. Here's what others have also said: Pierre Yared, the acting chair of the White House Council of Economic Advisers "The Citrini report is an interesting piece of science fiction -- and I like science fiction," Yared said in a brief interview after speaking at the National Association for Business Economics in Washington. "But 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." "AI can either be a groundbreaking innovation that increases production, increases income" and expenditure, "or it can be an innovation that ends up not delivering on its promise." Salman Ahmed, global head of macro at Fidelity International He said political leaders would take action to protect workers being displaced by AI. As well, the adoption of more AI tools is likely to be gradual because it's energy-intensive and many software systems are already deeply integrated with corporate operations. "Politicians are not stupid people," Ahmed said. "Ultimately the unemployment rate has an impact on policymaking. If there's a runaway technology which can do everything -- and we are not there yet -- then who's going to pay taxes? Are robots going to pay taxes?" "You have natural constraints in the system," he said, that would limit a sudden labor-market shock. Ed Yardeni, founder of Yardeni Research "AI is artificial but not intelligent. The output of LLMs sounds intelligent, but these models don't have a clue about what words actually mean." "The AI story has morphed from a Roaring 2020s productivity booster to an existential threat to our way of life. We continue to believe that AI is augmenting workers' productivity rather than making them extinct." Jim Reid, Deutsche Bank's global head of macro research and thematic strategy "The argument leans heavily on narrative and emotion rather than hard evidence. That doesn't mean it will ultimately be wrong, but in both cases the vibes to substance ratio is undeniably high. I'll stop there, before anyone accuses my own research of the same thing."

An AI Thought Experiment on Substack Is Sending The Stock Market Spiraling

On Sunday, analysis firm Citrini Research published a thought experiment on Substack that reads like a piece of fiction. Titled "The 2028 Global Intelligence Crisis," it's a scenario set in June of that year in which unemployment has shot up to 10.2% in the U.S. due to mass AI-driven white-collar unemployment, which begins with an "initial wave of layoffs" in early 2026. GDP growth is still great, and productivity is booming in this hypothetical scenario, with AI agents creating a "ghost GDP," aka "output that shows up in the national accounts but never circulates through the real economy." In this dystopia, consumer spending has hugely declined as a negative feedback loop has been formed. "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 forecasts. AI disrupts software, which leads to software-backed loan defaults. The pace of AI disruption is not contained to software in this scenario: AI agents, vibe coding, and autonomous driving come for the throne of delivery apps as dozens of vibe-coded DoorDash alternatives spring up overnight. Then, agentic commerce, coupled with stablecoins, gets rid of transaction fees and upends the business models of payment processors like Mastercard and card-focused banks like American Express. "What follows is a scenario, not a prediction," the authors wrote. "Hopefully, reading this leaves you more prepared for potential left tail risks as AI makes the economy increasingly weird." The result was mayhem on the market. Software stocks, like ServiceNow, which were already on an AI-driven downward journey, slid even more. This time, accompanying them were shares of delivery giants DoorDash and Uber, as well as payments companies like American Express, Blackstone, KKR, Mastercard, Visa, and Capital One. Some investors, at least, seem convinced, likely because there was already AI-driven negative sentiment in the market to begin with. Software stocks have been battered in February in what has been called the SaaSpocalypse. Scared investors are largely citing the release of new AI capabilities and agents in Anthropic's AI work companion, Claude Cowork, as the trigger for the sell-off. Wall Street seems certain that AI is on the road to becoming so good that people won't have to rely on the numerous specialized services provided by software companies anymore, and instead just vibe code whatever they need or ask ChatGPT or Claude to perform the task. "The seemingly wide moats of these companies feel a lot more narrow today as competition from AI-created products intensifies," Ocean Park Asset Management chief investment officer James St. Aubin told Reuters earlier this month. "Perhaps this is an overreaction, but the threat is real and valuations must account for that. My biggest fear is that this is a canary in the coal mine for the labor market." But flashy online projections of complete AI takeover are not magic crystal balls into the future. Similarly, early last year, former OpenAI employee Daniel Kokotajlo published a comprehensive prediction of a swift timeline to humanity-ending superintelligence, in a report that made waves across the internet and was even referenced by Vice President JD Vance. Just last month, Kokotajlo had to walk back his claims, saying that superintelligence development was actually happening slower than he anticipated. It's important to keep in mind that both the concept of and road to artificial general intelligence, aka AI that can surpass human intelligence and ability, is already a contentious topic among experts. Tech leaders like xAI's Elon Musk, Anthropic's Dario Amodei, and OpenAI's Sam Altman claim that AGI will be achieved sometime in the next 2-4 years (all three companies reportedly have flashy and highly consequential IPO plans for this year), but a November survey of industry leaders found that the average expert disagreed with that timeline. Even if the superintelligence timeline does become reality, experts don't see eye to eye on just how much it can disrupt industries. Experts claim that the software sell-off is "illogical" and "overdone," and improving AI ability would actually lead to demand for more software and the ability to create better applications at lower prices. There is also the irony that, as investors are selling off shares of other companies rapidly because they think AI is about to get so big so fast, they are simultaneously souring on astronomical AI spending commitments made by tech giants, and voicing concerns over an AI bubble. “It seems like markets found a reason to be worried about too little AI and too much AI at the same time,†Morningstar equity market strategist Lochlan Halloway told The Guardian last week.

Software companies face higher borrowing costs, tougher scrutiny as AI threatens businesses

Feb 23 (Reuters) - Software companies are delaying debt deals as higher borrowing costs and tougher scrutiny from lenders weigh on the sector, at a time when mounting pressure from artificial intelligence threatens their business models, industry sources said. Software firms both in the U.S. and elsewhere have already paused or postponed fundraising efforts as lenders and investors expect AI to upend the industry. These concerns have been underscored in loan markets, where spreads for risky companies have started to price in more defaults. AI jitters also affected private capital manager Blue Owl, whose shares slid after its latest move to sell $1.4 billion in assets to return money to investors. "We expect AI disruption risk to be increasingly reflected over 2026 to early 2027, particularly for lower‑quality credit sectors with elevated refinancing needs -- and more so in the U.S. than in Europe," said Matthew Mish, UBS' head of credit strategy. Leveraged loans, especially for U.S. tech companies, have begun to price modestly higher defaults. UBS expects defaults to rise 3% to 5% in a scenario of quicker market disruptions, compared with market expectations for an increase of 1% to 2%. "The disruption is going to play out over two years," Mish said. "We ultimately think that the market will price in a majority, but not all of the defaults that we're forecasting." Even those companies whose debt is deemed higher quality and less vulnerable to the impact of AI have held off on tapping markets until trading levels recover, one banker said. The market will closely watch investor reception to Qualtrics, a well-established software maker whose lenders will be in the market next month to raise a $5.3 billion acquisition financing package for its purchase of rival Press Ganey Forsta, a source familiar with the matter said. Qualtrics declined to comment. Press Ganey did not immediately respond to a Reuters request for comment. LEVERAGED LOANS The potential disruption from AI is having a bigger impact on more leveraged loan deals than high-yield bond deals, according to two bankers who declined to be identified discussing transactions. Technology industry borrowers, of which 60% are in software, account for the largest portion of leveraged loans, according to Brendan Hoelmer, head of U.S. default research at Fitch Ratings. Tech loans represent 17% of outstanding loans in the leveraged market, valued at $260 billion. Meanwhile, tech borrowers make up just 6% of outstanding high-yield bonds totaling $60 billion, Hoelmer noted. Of those, 70% are to software borrowers. A majority of the software sector's exposure is tied to lower credit ratings - with 50% of the loans holding a "B- or lower" credit rating - loans which typically denote a higher risk of default, Morgan Stanley estimates. Private credit software and services exposure is about 20%, BNP Paribas analysts estimate. U.S. stocks have also been roiled by AI, starting with investors dumping shares of software companies, then companies in sectors vulnerable to automation. The software index (.SPLRCIS), opens new tab is down 20% so far this year. Only 0.5% of outstanding software sector loans are due this year, while 6% are due in 2027, Fitch's Hoelmer said. On the high-yield side, only 0.7% of software debt is due this year and 8% in 2027, he added. Still, companies in the sector that have tried to tap U.S. debt markets have faced significantly higher borrowing costs from banks to underwrite the debt. Banks marketing the loans also are facing more skepticism from potential investors, according to the two bankers. Banks likely will ask for higher yields on new debt and deeper discounts on earlier debt, said the first banker, who declined to be named discussing specific deals. Companies will come off the sidelines when prices improve, the first banker said. Future deals are also likely to include stricter covenants, or legal protections for investors, to get done, the second banker noted. These include maintenance covenants, which force borrowers to keep their debt-to-earnings ratios below specific levels, the banker added. Several planned deals in the tech sector have been pulled or delayed since late January. European digital service provider Team.blue postponed an extension of its 1.353 billion euro ($1.60 billion) term loan from September 2029 and a repricing of its $771 million term loan, according to the first banker. Team.blue declined to comment. There are currently no leveraged loan deals for software companies, as companies and banks wait for trading levels on existing debt in the sector to recover from their losses since late January, when AI disruption fears rose. Meanwhile lower-rated companies with upcoming maturities "are likely to face greater refinancing and default risk in 2026," according to a Moody's Ratings report published in January. "I don't really see software and business services as being hot sectors for issuance over the next year," said Jeremy Burton, portfolio manager on the leveraged finance team of asset manager PineBridge Investments. "The technology is changing so quickly that you've really got to be confident." ($1 = 0.8482 euros) Reporting by Matt Tracy and Saeed Azhar, editing by Lananh Nguyen and Diane Craft Our Standards: The Thomson Reuters Trust Principles., opens new tab * Suggested Topics: * Finance Matt Tracy Thomson Reuters Reports on U.S. credit market activity, including corporate debt and credit ratings, U.S. Treasuries, commercial mortgages, and the ongoing public vs. private financing dynamic. He often reports on other topics and events in cooperation with team members across Reuters. Matt previously covered regulatory reviews and investigations into mergers and acquisitions, specifically anti-monopoly, national security, FCC and state-level investigations of some of the biggest deals since 2016. He has broken news on the government investigations into AT&T's merger with Time Warner, T-Mobile's purchase of Sprint, Bayer's merger with Monsanto, and many other multi-billion dollar combinations. Saeed Azhar Thomson Reuters Saeed Azhar is a Reuters financial journalist and part of the U.S. banking team, which covers Wall Street's biggest banks. He focuses on Goldman Sachs and Bank of America, and also writes about regional banks. Before moving to New York in July 2022, he led the finance team in the Middle East from Dubai, and also worked in Singapore, covering Southeast Asia finance.

Citadel Securities Rebuts Citrini 'Intelligence Crisis' Scenario

Flight counters a report from Citrini Research that envisioned a scenario where AI disrupts several industries and displaces large swaths of white-collar workers, saying governments would likely respond with regulations and fiscal stimulus to cushion the impact. The rapid expansion of artificial intelligence is unlikely to trigger mass job losses, according to a research note by Citadel Securities, pushing back against a widely circulated report that roiled markets this week. History shows that "successive waves of technological change have not produced runaway exponential growth, nor have they rendered labor obsolete," macro strategist Frank Flight wrote in a note Tuesday. His comments came after a report from Citrini Research envisioning a 2028 world in which rapid advances in AI turbocharge productivity but disrupt several industries, displacing large swaths of white-collar workers. The dystopian scenario contributed to a selloff in tech stocks Monday. It also sparked a heated debate among investors and policymakers, with a senior White House economist dismissing the report as "science fiction." Get the Tech Newsletter bundle. Get the Tech Newsletter bundle. Get the Tech Newsletter bundle. Bloomberg's subscriber-only tech newsletters, and full access to all the articles they feature. Bloomberg's subscriber-only tech newsletters, and full access to all the articles they feature. Bloomberg's subscriber-only tech newsletters, and full access to all the articles they feature. Bloomberg may send me offers and promotions. Plus Signed UpPlus Sign UpPlus Sign Up By submitting my information, I agree to the Privacy Policy and Terms of Service. Citadel's Flight argued that current data show little sign of widespread AI-driven labor disruption, citing surveys from the St. Louis Fed and labor market indicators he tracks. Job postings for software engineers -- a field seen as vulnerable to automation -- have jumped in recent months, and construction hiring appears to be picking up, supported by a boom in AI-related data center projects, he noted. Historically, technological change has followed an S-curve pattern: adoption is slow at first, accelerates as costs fall and eventually tapers off as markets approach saturation. As the technology diffusion slows, the risk of abrupt labor displacement diminishes, he said. In the current case, if the marginal cost of computing power used for AI rises above the marginal cost of human labor, the robot-for-human substitution will not occur, he said. Instead of replacing human workers, "it seems more likely that AI will be a complement" for labor in many areas, similar to past technological revolutions. "To frame this debate correctly, one can simply ask: was the advent of Microsoft Office a complement or a substitute for office workers?" Flight wrote. Citrini's research argued that the disruptive power of AI means that existing jobs will be displaced faster than new ones could be created. Founder James van Geelen described the note as a hypothetical scenario and "not a prediction." But Flight countered that in such a scenario, governments would likely respond to labor losses with regulations and fiscal stimulus to cushion the impact, limiting the pace of substitution. "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," he wrote.

'A feedback loop with no brake': how an AI doomsday report has rattled markets

Scenario posted on Substack envisages a near-future in which autonomous systems upend the entire US economy US stock markets have been hit by a further wave of AI jitters, this time from yet another viral - and completely speculative - warning about the impact of the technology on the world's largest economy. The latest foreboding is from Citrini Research, a little-know US firm that provides insights on "transformative 'megatrends'". Its post on Substack, which it called a "scenario, not a prediction", rattled investors by portraying a near-future in which autonomous AI systems - or agents - upend the entire US economy, from jobs to markets and mortgages. Citrini's scenario begins now and ends in June 2028 with US unemployment cresting over 10% and an Occupy Silicon Valley movement setting up camp outside of OpenAI and Anthropic's offices. In the interim, a series of events triggered by the widespread use of AI agents guts software companies and ripples outwards, hitting private credit and mortgages, and leading to an unchecked downward spiral. Speculative as it is, the scenario has unnerved investors. The S&P dropped more than 1% on Monday, and the software component of the index fell to its lowest level since Trump's "liberation day" tariff announcement in April. Doubtless some of the wobble is attributable to Trump's latest tariffs, but Uber, American Express, Mastercard and DoorDash, specifically named in Citrini's report, all lost between 4% and 6%. "It's real doomsday porn stuff, which is always lapped up by readers and market commentators and the press," said Neil Wilson, an analyst at Saxo Capital Markets. "I don't think it's necessarily going to play out as they see it, but it's a bit of a wake-up call that the economy already no longer resembles the one just a few years ago."

The AI doom-and-gloom scenario captivating Wall Street

The big picture: Will super-intelligent computing unleash stunning growth in output -- or will it be more like some previous big advances that created "ghost GDP" that didn't show up much in the economic statistics? * Will it push millions of workers -- especially white-collar professionals with high incomes -- onto the unemployment rolls? Or enable them to be far more productive and thus earn more? * Will it push more of the national income toward owners of capital and away from human laborers? If so, what does that mean for the broader perpetual motion machine that is the economy, where one person's spending becomes another person's income? * Does it justify stratospheric prices for stocks given the potential savings? * Or should it terrify investors who could see consumer demand dry up and now-lucrative business models implode? Zoom out: The sheer range of possibilities is dizzying. * These discussions have been roiling beneath the surface among technologists and economists. Now, they are getting more attention -- and not as a distant dystopia, but as near-term risks. State of play: On Sunday, Citrini Research and Alap Shah published a long, speculative essay that amounts to a doom-and-gloom scenario of where the economy and markets could find themselves in just two years. * In their scenario, companies rush to replace human employees with AI tools, only to soon find that demand for their products evaporates just as quickly. * This causes a 38% selloff in stocks and problems in credit markets like mortgages, as displaced workers can't pay their loans. * "Hopefully, reading this leaves you more prepared for potential left tail risks as AI makes the economy increasingly weird," the authors write. Yes, but: There are plenty of questionable assumptions in their scenario. One is that companies will be able to cut back on human employment as rapidly as assumed. Another is that a rise in unemployment wouldn't be matched by aggressive action out of Washington. * Still, it is a sign of the times that this 7,000-word essay about a hypothetical future has gone mega-viral, with the social media post that launched it getting 19 million views in a day. Flashback: History is filled with examples of innovations that had enormous consequences for daily life and created structural economic change -- but without showing up much in the data source for GDP and other statistics. * For example, broadcast television remade families' lifestyles and the way products were marketed. But it was a free product that only appeared in statistical tables via TV purchases and spending on advertising. * Workplace software created disruptions to clerical jobs that dwarfed spending on Lotus-1-2-3 or Microsoft Word. Between the lines: Even if you correctly project the evolution of a technology, it doesn't follow that you can predict the economic ripple effects. * Unfortunately, people setting economic policy don't have the luxury of sitting and waiting for the future to reveal itself. They have to set policy based on their best guess of where the puck is going. * In some cases, that means AI-affected economic policy choices that are set to be made this year. * The Federal Reserve may need to consider an argument put forward by President Trump's nominee to lead it, Kevin Warsh, who contends that the AI-driven productivity surge gives the Fed room to cut interest rates further without the risk of inflation. Reality check: "Thinking through all of the different risks from a new shock like AI is helpful, necessary and interesting," Ernie Tedeschi, the chief economist at Stripe, said in a post on X.

The week the AI scare turned real and America realized maybe it isn't ready for what's coming | Fortune

For months, the threat of artificial intelligence (AI) replacing human workers has hovered over the American economy like a distant storm. But this week, the storm made landfall, as viral doomsday essays seemed to become reality. AI executive Matt Shumer made a stir early in the month with an essay posted to X.com (and adapted for Fortune) that forcefully argued for white-collar workers to be afraid. He likened the moment to February 2020, with the pandemic rapidly approaching U.S. shores and a widely unprepared American public. The essay has been viewed 85 million times on the social media platform. He wasn't alone. Citrini Research, the top finance Substack, posted a similar essay on Feb. 22, warning of a "global intelligence crisis" brought on by sudden advancements in AI. The highly speculative, but deeply resonant essay painted a doomsday scenario of a "human intelligence displacement spiral" where AI agents rapidly replace software engineers, financial advisors, and middle management. At its core was the concept of a "ghost GDP" -- economic output that benefits the owners of computing power but never circulates through the human consumer economy. In this scenario, stripped of high-paying salaries, prime borrowers default and tank the $13 trillion residential mortgage market, unemployment spikes above 10%, the stock market corrects down 38%, and the economy collapses into a deflationary spiral. Unusually for a work of speculative fiction, the market reacted to the piece, showing that the "AI scare" trade was real, at least in readers' minds. The Dow Jones Industrial Average was down over 800 points on Monday (1.66%), with software stocks getting hit especially hard. Analysts and economists responded throughout the week that the economics implied by Citrini's argument were unsound, but on Thursday, Twitter co-founder and current Block CEO Jack Dorsey stunned the market by announcing a massive 40% downsizing of his company's ranks. In words that could have come out of the Citrini report, he wrote to shareholders that "intelligence tools have changed what it means to build and run a company." Block stock rose nearly 14% the next day. "This is one of the first major examples of AI driving layoffs, but certainly not the last," Matt Shumer wrote on X. "If you're saying 'this won't happen to me,' reevaluate your thoughts. Now. It may be the most important thing you do." Many Wall Street banks, top economists and even AI CEOs consider this all to still be overblown hype, cautioning that macroeconomics 101 implies the Citrini narrative is false. Others stake out a middle ground, predicting an AI transition that will be difficult but ultimately positive. But the Block layoffs suggest that, at least in the tech sector, the AI scare is moving from market narrative to sudden reality. And America isn't prepared. Veteran macroeconomic analyst Albert Edwards of Societe Generale is a certain type of famous in the finance world for his alternative, somewhat contrarian views, which the French investment bank stresses do not reflect its house opinion. In 2023, he wondered aloud in his weekly strategy note about the phenomenon of "greedflation" signaling potentially the end of capitalism, as record high profit margins indicated that corporations were raising prices more than they needed to, with the working and middle classes suffering as a result. Edwards claimed the Citrini research vindicated his analyses of late. "The AI macro doomsday scenario is not for 2028," he wrote on Monday. "It's here right now!" He cited data showing that the U.S. consumer was "running on fumes" as incomes had "hit a brick wall" during the greedflation era. "I can honestly say that if I was 18 now, there is no way I would go to university only to leave with huge debts and poor job prospects," he wrote. "Instead, I would become an electrician or similar trade." Nicole James, a 42-year-old former creative executive who built Snapchat's content team, is living the reality that Edwards described. After a series of increasingly senior roles, including her stint at Snap, she was head of content at the animation studio Invisible Universe until 2023, when the company pivoted to become an AI studio and laid off half its staff. James hasn't been employed full-time since, despite never having a gap in employment for the previous decade-and-a-half. She told Fortune about sending out hundreds of applications and facing endless ghosting and a profound lack of respect for her creative skills. Maybe she's a victim of an entertainment recession more than an AI victim, she said, but she's working retail to make ends meet. She also said she's struggling with a certain loss of identity. "I really felt embarrassed when I showed up to work the first day and like put on my name tag," James admitted. "It's very shocking. Like I just fell off a cliff and I don't, I have no flashlight." Most of the country feels as if they're on the cliff or falling, according to Laks Ganapathi, founder of the independent investment research firm Unicus. Ganapathi's firm produced a research note very similar to the Citrini scenario in mid-January, she said, except they called it the "vibecession," a term popularized by economics writer Kyla Scanlon. Forecasting high unemployment and stubborn inflation into the second half of 2026, she predicted that "companies will lean as much as they can, as fast as they can with AI. And that is going to cut a lot of jobs. And some companies in the process are going to completely stop existing as a going concern." Then, because of "skyhigh inflation" and sticky inflation, Ganapathi argued, a huge amount of people will persistently experience recession, while another segment of people will insist that the data shows everything is fine in the economy. She said the "huge disconnect between the data and the reality will keep widening, and AI will only make it worse." It sounds a lot like the "ghost GDP" thesis of the Citrini essay, she agreed. What really matters about this disconnect, she added, is that it means the economy won't experience a "clean, single-event collapse." Millions of Americans, in other words, could find themselves in a continuous tumble off a cliff, without the flashlight. Wall Street is attempting to talk the market off the ledge. Citadel Securities published a blistering takedown of the Citrini essay, pointing out that the data flatly contradicts the thesis. If AI is so destructive, they argued, why is demand for software engineers actually up 11% year-over-year? Citadel argues the doomsday thesis relies on the "recursive technology fallacy," ignoring the physical constraints of energy and compute power that naturally brake infinite AI expansion. Historically, Citadel notes, productivity shocks lower marginal costs, expand output, and increase real income, acting as a complement to human labor rather than a strict substitute. Other critics of the Citrini essay include Tyler Cowen, of Marginal Revolution fame, and Robert Armstrong, the Unhedged columnist at the Financial Times. Morgan Stanley similarly urged calm, reminding investors that while AI will alter the labor force, it will not permanently replace it. Instead, the firm predicted a wave of entirely new corporate roles, such as the "Chief AI Officer" and specialized jobs like "computational geneticists" and "predictive maintenance engineers." Morgan Stanley even envisioned a new product manager/engineer hybrid role centered around "vibe coding" -- prototyping concepts through natural language before handing them off for deployment. Bank of America Research, for its part, claimed the "apocalyptic narrative" about AI "doesn't square well with sound economic theory." Global economist Claudio Irigoyen wrote on Friday that the selloff in markets to "a combination of crowded positioning and multiple equilibria, similar to a bank run triggered by unfounded rumors of insolvency," similar to warnings from UBS' Paul Donovan and Apollo Global Management's Torsten Slok that retail traders' prominence is leaving markets vulnerable to narrative and knee-jerk movements. Notes of caution included Citigroup allowing that "eventually, AI implementation will lead to higher unemployment and deflation," while Goldman Sachs allowed that "AI impacts could be more frontloaded than the 10-year adoption cycle embedded in our forecasts," but a "gradual and orderly adoption cycle" remains the most likely outcome. Even several tech CEOs told Fortune, echoing recent comments from PromptQL founder Tanmai Gopal, that the AI job-loss narrative is mostly hype and there will be plenty of jobs going forward. David Stout, CEO of webAI, the AI lab that was valued at $2.5 billion as of January, said the scenario for jobs going forward will be like a closely watched travel budget. If you don't use up every penny of the budget, your company will take back what's not being spent. Instead of massive job loss, he said, companies will be "much more optimized" with proper AI adoption. "I think AI is going to help signal some employees that probably aren't contributing ... You'll see companies let people go because they're like, 'Wait a second, AI is doing what you said would take a year to do. Something's wrong.' I think it's going to be like those type of moments." Still, as an AI executive himself, Stout said he thinks it's absurd to argue that the technology can really replace humans. "AI is not just this autonomous thing that goes and does exactly what it needs to do," he said. "If it is, we're not seeing it." Even an executive inside an industry actually being disrupted -- insurance -- poured cold water on the mass displacement theory. Amrish Singh, CEO of the AI insurance startup Liberate, told Fortune that he's seeing tremendous growth in terms of what AI can automate in the repetitive, mechanical processing of insurance claims. "We're today at about 2.8 million automated actions a month...tasks, things that we can automate using AI." He also noted major disclosures from Allianz and Travelers about huge savings already being achieved as a result of AI adoption. "We're seeing many companies, not just Liberate customers, but across the insurance industry, finding a way to use AI specifically on those ordinary tasks, you know, answering phone calls, emails, SMS, resolving the request for the customer with serious ROI." The reason people shouldn't fear the looming cliff of job loss, he added, comes down to a basic understanding of the insurance industry. Estimating that $25 out of every $100 spent on handling a claim is operating expenses -- answering calls, emails and the like -- that's a huge saving in the $1.2 trillion insurance industry. Even then "this particular industry is one where there's always value of human effort, right? Humans are amazing at judgment." Every insurance claim will require a visit, and then likely a lengthy conversation, with a claims adjuster, he added. "Humans are amazing at evaluating a very specific, unique circumstance." There's another thing about humans with this AI transition, Singh added: "Humans swing between doomsday and complete disbelief," while the truth lies in the messy middle. Ultimately, Singh predicted the integration of AI will follow the historical pattern of enterprise technology: "It's slow, and then it's sudden." What it still comes down to, as well, is the physical reality of the AI boom and the fact that data centers represent a bottleneck -- adoption will be limited as long as the amount of compute is limited as well. Mike Mathews proudly recalled to Fortune that he began his career in the Boston area as a fourth-generation plumber, with his family working in the blue-collar trades dating back to the 1920s. Now that he's the global digital infrastructure practice leader for Marsh, he's familiar with the figures: The world currently has 12,000 data centers, with 3,000 more planned, and he said both white-collar and blue-collar jobs will be replaced by what he called the "new-collar" economy. "You're going to have very, very high-paid blue-collar workers," Mathews said. He argued that a massive social shift is required, as parents must begin guiding their children toward vocational training and technical labs rather than strictly white-collar degrees. And these won't be one-time jobs just for the construction of the data centers, either; Mathews said the vast majority will require complete retrofitting to handle AI's intense power and liquid cooling needs. "It's hard to imagine two white-collar parents understanding the path to a very successful blue-collar career where an electrician is working in a data center making $250,000, [or] $300,000. It's unimaginable, but that's where we're headed." Mathews included himself in this big social switch that needs to happen, when asked about whether he'd want his own kids to follow in the family footsteps. Explaining that his daughters opted for white-collar work, he said, "I live that dream of seeing them ... going to a skyscraper [for work], holding a Starbucks coffee, not going to a data center and working on high-voltage switchgear." But he said it will be a big value going forward to emphasize getting both kinds of education. "There's time in your life to get both, certainly before the age of 24. Get some technology training, get some hands-on training, get various skill sets."

An AI doomsday Substack post sparks a mini stock market crash

What was behind a mini stock market crash on Monday -- one that sent the down Dow by 1.7% and some individual stocks like Monday.com and DoorDash down about 7% each? According to a plethora of coverage from the Wall Street Journal to Fortune, it was an all-too-plausible Substack post from Citrini Research, one of Substack's best-known and most widely read financial newsletters. Here's what to know. The basic mechanism the post's authors foresee is this: American companies that typically buy a range of software services from the likes of Zendesk and Monday.com are finding they can replicate the software's capabilities in-house, essentially vibe-coding such systems using AI. As a result, these client companies discover they have bargaining power, so that they renegotiate their contracts with the software companies, or cut those contracts altogether. To preserve margin, the software makers then lay off staff. A range of similar phenomena then causes white-collar layoffs to accelerate across the economy, and also causes wage deflation for white-collar workers who remain employed yet find themselves with less-bargaining power. Summarizing the possibility, the post's authors put it this way: "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..." At the same time, "agentic commerce" -- an umbrella term that refers to AI changing both selling and buying patterns -- could eliminate the advantages many companies from apps like DoorDash to transaction facilitators like Visa $V rely on for their moats, namely customer loyalty and inertia. Because AI feels no loyalty and no inertia, the post pointed out, it could function to relentlessly drive down premiums associated with such factors. As white-collar layoffs continue to grow, and white-collar wages simultaneously soften or fall, all these effects grow more pronounced, the post suggested. "The consensus view was that creative destruction was part of any technological innovation cycle. It would be painful in pockets, but the overall net positives from AI would outweigh any negatives," the post's authors said, summarizing this optimistic view. The problem? AI displacement of labor and AI's deflationary effect on wages may not be cyclical but structural, and the optimistic view may also fail to account for shorter-term but potentially catastrophic cascading effects of white-collar wage deflation. "The U.S. economy is a white-collar services economy," the post said. "White-collar workers represented 50% of employment and drove roughly 75% of discretionary consumer spending. The businesses and jobs that AI was chewing up were not tangential to the U.S. economy, they were the U.S. economy." Thus, in such a scenario, a hollowing out of the white-collar part of the economy would create "a negative feedback loop with no natural brake," which the post also called "the human intelligence displacement spiral." However, the real-time and real-world market effects could be a simple flash in the pan. Tuesday's futures pointed to a modestly positive opening for the overall market, as well as for many of the individual stocks mentioned in the post. What has become clear is that optimistic theories about AI creating broad U.S. economic strength have shaky foundations, if only in terms of investor confidence. If a Substack post can thoroughly rattle such assumptions, that suggests plenty of traders and other stock-market participants may feel more profound fear than they may publicly admit.

AI doomsday scenario paints bleak picture of economic collapse by 2028

AI-related layoffs could trigger a vicious cycle of higher unemployment, less consumer spending and social upheaval, according to a thought experiment scenario. Artificial intelligence (AI) could soon replace human labour at a scale and speed that society cannot handle, according to a new scenario that imagines life in 2028. The prediction envisions a "global intelligence crisis" that hits the world by 2028 due to the replacement of high-skill labour with AI. James Van Geelen, chief executive of Citrini, an American investment research firm and Alap Shah, an AI entrepreneur, wrote the paper as a fictional memo dating from June 2028, looking back at how the crisis unfolded. They envision that the layoffs "due to human obsolescence" began in 2026, as companies started employing AI agents to do tasks without human supervision. Van Geelen and Shah refer to the firings that have happened in the tech sector in January, with Amazon, Expedia and Pinterest all announcing AI-related job cuts. However, experts have previously said that it's difficult to determine whether AI efficiencies were to blame. Tech job cuts start a vicious cycle: as companies invest more in AI, the models become more capable and justify more layoffs, the authors wrote. "Each company's individual response was rational. The collective result was catastrophic," the prediction reads. Businesses had to adopt the latest technologies to stay competitive, so those "most threatened by AI became AI's most aggressive adopters," the authors said. According to them, displaced white-collar workers moved into lower-paying roles and blue-collar trades, while the few who kept their jobs faced wage stagnation. By mid-2027, the US economy tips into a recession and by 2028, unemployment exceeded 10 percent. The paper envisions that by 2027, AI agents run in the background of people's devices. They write all computer code, they handle weeks-long research projects and optimise how users spend their money. While AI does create some jobs in the new economy, such as prompt engineers, safety researchers, and infrastructure technicians, it renders dozens more obsolete. The new roles also pay a fraction of what the old ones did, the scenario predicts. The shift of white-collar workers to lower-paying jobs further depressed wages as the labour supply surged. Many households are forced to turn to credit cards or retirement accounts to cover their mortgages. By 2028, the US economy is on the trajectory for another mortgage crisis. To mitigate this, the government needs to transfer more money to households, even though it will be collecting less taxes from them due to their wage losses. The authors note that this could put additional strain on the economy. The authors also predict an "Occupy Silicon Valley" movement similar to the one on Wall Street in the 2010s, where demonstrators in May 2028 blockade entrances to Anthropic and OpenAI's San Francisco offices for weeks. Van Geelen and Shah caution that these scenarios may not unfold exactly as described, but they argue that AI is already changing the economy faster than institutions can adapt.

AI-linked fears roil some corners of Wall Street after years of hype and gains

Stocks surged to records in large part because of hope -- and hype -- about artificial intelligence. But in recent months, worries about aggressive spending on AI have rippled through Wall Street as investors question whether that spending will materialize into actual profits. And some industries wavered this week as anxieties about the technology intensified, underscoring how quickly sentiment has shifted since the start of the year. Visa, Mastercard and IBM all fell sharply Monday, extending a broader bout of volatility across AI-linked names. Tuesday saw a modest bounce back across the markets as some software stocks also rebounded, thanks to new AI integrations announced by Anthropic. The benchmark S&P 500 index remains roughly flat for the year. Since November, AI-powered coding systems such as Anthropic's Claude Code and OpenAI's Codex have surged in capabilities and popularity among software developers. Using these tools, complex software packages and products can now be developed in minutes or days. The most recent sell-off came after a grim and now-viral weekend substack post by Citrini Research warned of an eventual stock market crash, a sharp pullback in consumer spending and widespread white-collar layoffs by 2028 as a result of AI. Payment companies such as Mastercard and American Express were hit particularly hard as traders contemplated a future with lower spending. Both companies were mentioned as potential victims of the AI rush in the Citrini post. While Citrini has published analysis about AI for years, Sunday's post stood out for its intricate, dramatic description of a world with widespread unemployment and reduced economic activity. On Monday, IBM suffered its worst, single-day drop since October 2000, during the height of the dot-com boom and bust. Part of the pressure followed Anthropic's midday announcement that its Claude Code tool can be used to update a legacy computing language prized at IBM. Investors viewed the development as a potential threat to the kind of maintenance and modernization work that underpins IBM's legacy business. Shares of Accenture and Cognizant Technology, two other consulting and professional service companies, fell in tandem. The weakness in these individual stocks spilled over into the broader market. All three major indexes fell Monday, led by a more than 800 point drop in the Dow Jones Industrial Average. Five of the 11 S&P 500 sectors also closed in the red with financials and consumer discretionary leading the declines, down 3.3% and 2.2%, respectively. It's an irony not lost on Wall Street: The same force that's fueled the tech sector's explosive gains over the past two years is now driving investor hesitation. Mona Mahajan, head of investment strategy and asset allocation at Edward Jones, said investors have been quickly pulling money out of sectors viewed as vulnerable to AI disruption, including financial services, real estate, transportation and logistics. She noted that despite the sharp moves in stock prices, the underlying businesses themselves haven't materially changed, underscoring how much of the reaction remains speculative. One standout in Monday's sell-off was the consumer staples sector, home to companies such as Walmart and Coca-Cola, as investors put their money into stalwart businesses less likely to be disrupted by AI. While Anthropic and OpenAI have seen their valuations soar in the past year, investors covering industries ranging from logistics and trucking to legal services are waking up to the fact that traditional barriers to entry for competitors might soon be dissolved by AI's coding power. Melissa Otto, head of Visible Alpha research at S&P Global, told NBC News that growing AI-focused capital expenditure and recent advances in the field threatened many existing business models. "I think it has started to call into question how exactly software companies are really going to compete and provide something superior in this environment," Otto said, highlighting that companies with more complex workflows and troves of unique data stand a better chance of withstanding the coming AI storm. "Data that underlies generative AI that has predictive qualities and is proprietary, that can potentially really give firms an edge." Beyond AI, markets are also contending with growing fears of war between the U.S. and Iran and the legal whiplash around President Donald Trump's now-invalidated emergency tariffs. Still, some Wall Street analysts argue the latest trade developments could serve as a constructive distraction for U.S. markets in the near term. "Investors have been ruminating on a number of AI concerns in early 2026, with concerns about cash flow, capex levels, and whether a number of different industries will survive the AI era," Lori Calvasina, head of U.S. equity strategy research at RBC Capital Markets, wrote in a note to clients Monday. "We generally have thought the existential concerns for industries other than software like wealth management and transportation/logistics have seemed overblown, and we think it would be healthy for the equity community to turn its attention to other topics for a while."

Citrini Founder Shocked His AI Prediction Spurred Stocks Selloff

The last thing James van Geelen expected to do on Monday was trigger a stock market meltdown. But that's what he did. The 33-year-old founder of Citrini Research published his dystopian scenario for an artificial intelligence future on his firm's Substack on Sunday. Called "The 2028 Global Intelligence Crisis," it described a hypothetical economic plunge in which mass white-collar layoffs create a deflationary cascade that pushes the unemployment rate above 10% while stock prices are wiped out. By Monday morning, the over 7,000-word post was the talk of the market. And when trading opened, the selling started. The S&P 500 Index quickly went from green to red and ended down more than 1% on the day. A gauge of financial shares had its worst session since April. A major software exchange-traded fund tumbled more than 4%. The report also named a number of specific companies, including ServiceNow Inc., DoorDash Inc. and American Express Co., and those shares sank. Citrini isn't short any of those names. By the end of the day, van Geelen's phone was blowing up, and a bunch of potential new customers were requesting his firm's research or offering feedback. "If I thought that stocks were gonna move on this, I wouldn't have made it free," van Geelen said from Miami, where he's meeting clients. Investors were already skittish after weeks of AI-related selloffs targeting a range of industries such as software, insurance brokerage, wealth management and cybersecurity, among others. On Monday, concerns over tariffs and geopolitics coupled with the Citrini report and worries about the potential disruption caused by another tool from AI startup Anthropic were enough to send the stock market careening. The stocks and indexes that got punished Monday rebounded with the broader market on Tuesday. But the one-day panic revealed how dicey things have gotten on Wall Street in recent months as the sentiment around AI turns from enthusiasm about growth to worries about disruption. "The market is clearly jumpy about this," van Geelen said. "The article clearly served as a focus point for investors who were already concerned about the second-order disruption to incumbents by AI, and that anxiety hit a fever pitch when our article pointed to the worst case scenario." Stumbling Into Finance The Citrini Research founder never intended to go into finance. His plan was to be a doctor when he was a student in college, but he gave that up before attending medical school. He then founded a alternative medicine company that he sold to a private equity firm in 2018. He used the proceeds to start investing and writing research. Wall Street first noticed van Geelen's work after the demise of Silicon Valley Bank in March 2023. He posted about being short the stock in late 2022, and the lender collapsed just a few months later. Suddenly the finance community knew his name. "It doesn't really matter who you are, you can very much be just judged on the meritocracy of your ideas," he said. "If you have a good idea and then the other great thing in finance is your idea has kind of a scoreboard. Nobody can really say you're wrong if the number on the screen says you're right." In 2023, van Geelen began monetizing his research behind Citrini's paywall. The firm, which focuses on thematic investing research, has about 10 employees and is based from New York. The platform has built a devoted following, with more than 119,000 subscribers. Its research spans topics from modern warfare and humanoid robots to GLP-1 drugs and broader macro trends. It is the top bestseller among Substack's paid newsletters. Among Citrini Research's model portfolio AI holdings are Nvidia Corp, Alphabet Inc., Macronix International Co. and Mediatek Inc. The firm has been publishing baskets of stocks related to its thematic ideas since its inception, and van Geelen said Citrini historically has been criticized for being too bullish. "We're definitely not allocated for a financial crisis," he said. Get the Markets Daily newsletter. Get the Markets Daily newsletter. Get the Markets Daily newsletter. What's happening in stocks, bonds, currencies and commodities right now. What's happening in stocks, bonds, currencies and commodities right now. What's happening in stocks, bonds, currencies and commodities right now. Bloomberg may send me offers and promotions. Plus Signed UpPlus Sign UpPlus Sign Up By submitting my information, I agree to the Privacy Policy and Terms of Service. Citrini doesn't manage outside money. Citrinitas Capital Management Inc., which does business as Citrini Research, is listed as a selling shareholder on a prospectus filing for RoboStrategy Inc., a closed-end fund focused on "equity and equity-linked investments in robotics and embodied AI companies." The 50,000 shares attributed to Citrinitas amount to 0.25% of the total shares being registered for a potential resale. Starting a Conversation Naturally, van Geelen has been inundated with feedback since the report hit. His favorite conversation was with an investor who disagreed with the thesis, and when he asked them to explain their thinking, their response was from Anthropic's Claude AI chatbot. "If you're outsourcing your thinking about why the thesis that AI will replace us is wrong by going to AI, you kind of undermined your point," he said. The case van Geelen presented in his post came from a conversation with his friend and now Citrini contributor Alap Shah, whose first contribution was the dystopian AI scenario. Shah is chief executive officer of AI firm Littlebird and managing partner at Lotus Technology Management, according to the company website. The report was meant to be a conversation starter "to prevent anything like what's described in the article from coming to pass," van Geelen said. "We saw a scenario that wasn't being discussed, and it was a scenario that we spent a lot of time in the beginning trying to disprove internally. We couldn't get to the point where we were comfortable saying there's a 0% chance that something like this happens." To van Geelen, these kinds of conversations and debates are crucial for society to navigate through the unprecedented thorny issues being raised by the emergence of AI. "If you're the most bullish on AI disruption, what happens after that?" he asked rhetorically. "As a society, we really need to wrestle with the fact that over the course of history, the most productive kind of asset has always created jobs for humans."

'If I was 18 now, there is no way I would go to university only to leave with huge debts and poor job prospects,' analyst says. He'd be an electrician | Fortune

As artificial intelligence (AI) threatens the white-collar job market and the cost of living continues to skyrocket, and while doomsday essays about white-collar job loss go viral -- including those by Citrini Research and by Matt Shumer -- a top global strategist has a stark warning for today's youth: skip university and learn a trade. Albert Edwards, a veteran macroeconomic analyst known for his contrarian views and his self-described "perma-bearish" outlook, is sounding the alarm on an economy that is systematically leaving young people behind. Specifically citing the mega-viral doomsday essay by Citrini Research, Edwards wrote in his global weekly strategy that he's been making the exact same arguments from inside a global investment bank. Once you factor in the "current clear benefits of surging AI-led productivity growth for investors," along with lower unit labor costs, inflation and interest rates, he argued, "the blindingly obvious conclusion [is] that AI is already causing serious damage to aggregate job prospects, especially those of recent university graduates." "I can honestly say that if I was 18 now, there is no way I would go to university only to leave with huge debts and poor job prospects," said Edwards. "Instead, I would become an electrician or similar trade." Edwards even dabbled in the field when he was 22, rewiring his first house in 1983, which he claims to be a success save for losing the top of his left thumb when his interacted with a live connection. "To my knowledge, that house hasn't burnt down yet." Edwards, who has previously talked to Fortune at length about what he describes as his radicalization as an analyst, stresses his views do not represent the house view at Societe Generale. He has long criticized capitalism, as evidenced in his 2023 analysis of corporate profit margins hitting an all-time high. In it, he wrote "we may be looking at the end of capitalism." Three years later, he's now predicting the end of perhaps the human side of capitalism. "The AI macro doomsday scenario is not for 2028," he wrote. "It's here right now!" Edwards' warning stems from this belief that 2028 will be too late for the AI doomsday scenario to play out because of the damage already visible in his analysis. Job cuts, initially concentrated in the tech sector, are now spreading to unexpected industries, including insurance, fund management, and logistics. But at the crux of Edwards' analysis is the evidence he sees that the consumer is "running on fumes." While aggregate consumer spending appears to be growing at a healthy rate of nearly 3%, he highlighted that the growth is fundamentally hollow, entirely unsupported by real personal disposable income, which has remained flat for the last six months. Instead, Americans are surviving by draining their savings. The personal saving rate has collapsed to an "eye-wateringly low" 3.6% -- a level not seen since the euphoria of the 2006 housing bubble. He believes the economy is barreling toward an AI-led consumer crunch, where job cuts cause weaker consumption, triggering a vicious cycle of further layoffs as companies try to maintain their high margins. The Citrini Research report, for comparison, warned of a "deflationary spiral" and "ghost GDP." This would be caused by AI as the white-collar workforce suffered a brutal recession from sudden and rapid displacement. In a services-heavy U.S. economy -- where white-collar jobs account for roughly 50% of employment and 75% of discretionary consumer spending -- the report argued that AI-driven productivity gains would accrue to capital, not labor, with profits reinvested in machines rather than people. In other words, a scenario very much resembling the stagnation in real income growth that Edwards says is already underway. Edwards added that he believes the recent slump in the savings ratio is a short-term reaction to "real incomes hitting a brick wall." The personal saving ratio will soon either stop falling -- sending consumption growth to zero -- or rise on a precautionary basis, causing overall consumption to decline, he added. While sell-side research has been somewhat slow to respond to the Citrini note -- which by some estimates, triggered a $300 billion selloff in 2026 markets so far -- Evercore ISI's Krishna Guha criticized it as "a high tech version of Marx's thesis that capitalism would ultimately destroy itself by immiserating the petit bourgeois and working class until it had no consumers left, no additional profits to be earned on existing products produced, and no reason to grow." Others, such as Marginal Revolution blogger and George Mason economist Tyler Cowen and Ritholtz Wealth Management CEO Josh Brown, have argued that it's improbable that AI would represent the first time in hundreds of years of capitalism that new jobs would fail to be created by technological advancement. Edwards previously told Fortune that much of his analysis is rooted in his sense that this is the first generation of Americans who do not feel they will be better off than their parents, creating a primal sense of betrayal. He argues that by being excessively greedy, corporations have "laid the seeds for their own destruction". The lack of a true stake in modern capitalism takes the incentivization out of the economy for young people entirely. He pointed out that current economic conditions have created intense "intergenerational strife". Young people are currently shut out of wealth concentration and face a nearly impenetrable housing market, heavily evidenced by the fact that the average age of a first-time homebuyer has now hit 40 years old. Fortune recently interviewed Seth Lavine, a veteran venture capitalist, and Elizabeth MacBride, a veteran journalist, who co-authored Capital Evolution: The New American Economy, a book grappling with the same soul-searching over where things are headed. MacBride highlighted that neoliberal capitalism was born in an era that ignored behavioral psychology and relied on a purely economic view of human motivation while dismissing the reality that people are highly emotionally driven, and with neoliberalism largely discredited after the crisis of 2008, this period is a "messy middle." As they learned in interviews for the book, business leaders including BlackRock CEO Larry Fink and JPMorgan CEO Jamie Dimon share concerns about what's next, as do many normal, everyday middle-class Americans. "Belief in the future is breaking down," MacBride noted, pointing to alarming indicators such as dropping life expectancy and a suicide crisis among white men as stark evidence that the system is malfunctioning. Economic mobility has severely contracted: 50 years ago, an American born in the bottom wealth quartile had a 25% chance of reaching the top, but today that chance has plummeted to just 5%. "People do not feel like following the rules of the system is going to get them anywhere," she added. "This is probably the first generation [that] won't be expected to outrun their parents," Levine added. "So I mean, just by basic measures, we're failing to provide for sort of economic mobility." Perhaps the reason the AI doomsday scenario has struck such a chord is the idea that, instead of potentially restoring the middle class in the 21st century, this technological advancement could go further in the direction of entrenching inequality, wiping out the white-collar careers that left a lucky few with precarious middle-class status. Could picking up a toolbox be safer than risking financial ruin for a vulnerable white-collar career? As Edwards previously told Fortune of modern capitalism's dysfunctions, "You reap what you sow".

Energym Ad's Dystopian AI Future Collides with Real-World Layoffs

A viral spoof "Energym" advertisement set in a 2030s world where 80% of people have lost their jobs to artificial intelligence has struck a nerve as companies accelerate automation, job openings slump and investors grapple with darker AI scenarios. The video clip, created by Belgian studio AiCandy, uses AI-aged versions of Elon Musk, Sam Altman and Jeff Bezos to hawk a fictional gym where unemployed workers pedal bikes and row machines to power the very AI systems that replaced them, trading lost income for a new sense of "purpose." The satire lands amid a real wave of tech restructuring built around AI tools rather than human staff. On Friday, Jack Dorsey's fintech firm Block announced that it was cutting more than 4,000 roles (close to 40% of its workforce), in a bid to go lean using intelligence tools, paired with "smaller and flatter teams." Related: Bitcoin to see tailwinds if AI prompts 'easier monetary policy': NYDIG Fresh labor market data from the US Bureau of Labor Statistics show demand for some office jobs has cooled. Finance and insurance openings fell to 134 a month by December 2025, 50% lower than the year prior, marking a decade-long low. Market jitters over where this trajectory leads intensified in February when a 7,000‑word scenario from Citrini Research, a US firm that provides insights on "transformative" trends, sketched out a future of AI agents, cascading layoffs, falling wages, and a deep market crash later this decade. The report, framed as a scenario rather than a forecast, nevertheless helped drive a sell-off in software and payments stocks, with companies such as Uber, American Express, and Mastercard dropping between 4% and 6% in one session as investors reassessed how quickly AI could erode demand for human labor. For David Minarsch, CEO of Valory and founding member of Olas Network, a crypto protocol for co-owned AI agents, the Energym vision is one possible path if AI remains "built as black boxes" and owned by a handful of centralized platforms. He told Cointelegraph that rapid AI deployment was already reshaping software engineering, with almost all his team's code now generated by AI under human oversight compared to mostly human-written code just six months ago. Related: AI 'vibe coding' could put Ethereum roadmap ahead of schedule: Vitalik Buterin "If this trend accelerates," he said, we are on a path to a future that's caricatured in the Energym ad," arguing that society was at a "pivotal inflection point." Minarsch warned that a world where AI agents are granted something like personhood and legal protections could permanently "disenfranchise humans" by turning capital, rather than labor, into the dominant input for production. He pointed to AI labs that describe models as being "retired" as an early step toward treating systems as stakeholders in their own right. Minarsch said that projects like Olas were betting that giving people direct ownership and control over AI agents, rather than renting them from platforms, could be one way to stop the Energym scenario from becoming a reality.

Doomsday scenario or reality? Mass layoffs fuel fear of AI Armageddon

Hiring managers are highlighting soft skills as a way employees can prove their value to the company. A doomsday scenario from a small research firm this week warned that artificial intelligence tools may lead to a sharp rise in unemployment. The report from Citrini Research circulated widely on social media, unnerving investors by imagining what would happen if AI continues to upend white-collar work from well-heeled professionals missing mortgage payments to being forced to find work as Uber drivers. While the researchers called the report a "scenario, not a prediction" and analysts pushed back against it, the research got a second wind Thursday, Feb. 26, when Square and Cash App operator Block said it would slash nearly half its workforce -- more than 4,000 employees -- as AI reshapes its business. The mass layoffs signal how the rapidly developing technology is displacing workers in some parts of the economy, likely fueling fears that AI is coming for more American jobs. In a post on X, Jack Dorsey said his payments company chose a single round of deep cuts instead of layoffs spread over months and years to protect morale and customer trust. He predicted other companies would follow suit as they reap more productivity gains from AI tools. "I don't think we're early to this realization. I think most companies are late," Dorsey told investors on the Block earnings call. "Within the next year, I believe the majority of companies will reach the same conclusion and make similar structural changes." Not everyone was convinced that AI is the culprit. "Maybe Block laying off a ton of employees is a sign that AI is gonna destroy everything," Ben Carlson, director of institutional asset management at Ritholtz Wealth Management, wrote on X. "Or maybe the stock is down 80% from the highs and they overhired and AI is a convenient excuse." Will AI wipe out more American jobs? Block is also not the first company to blame AI for workforce cuts. Pinterest, CrowdStrike, and Chegg are among the companies that attribute layoffs to AI advancements. Salesforce cut roughly 4,000 customer-support roles last year. Ford CEO Jim Farley said last summer that AI will "replace literally half of all white-collar workers in the U.S." The trend has the policymakers' attention. "You see a significant number of companies either announcing that they are not going to be doing much hiring, or actually doing layoffs, and much of the time, they're talking about AI," Federal Reserve Chair Jerome Powell said in October. "We don't really see it in the initial claims data yet. Now, it's not a surprise that we don't. It takes some time for it to get in there." How many jobs could be on the line is hard to peg. A survey in September, highlighted by the Federal Reserve Bank of New York, found 1% of service firms reported they have dismissed employees because of AI in the past six months, down from 10% last year. But 13% of those firms said they anticipated layoffs in the next half-year. Looking ahead, "layoffs and reductions in hiring plans due to AI use are expected to increase," the Fed survey found.

A Viral AI Doomsday Report Just Shook Wall Street -- Even as the Market Shrugged It Off

In a piece that reads like a sci-fi dispatch from a near future wracked by automation and economic death-spirals, a new memo from the markets analysis firm Citrini Research explores what it calls "a thought exercise in financial history, from the future." In other words, it's the small research group's attempt to map out a worst-case (or at least worse-case) scenario for the next few years of the AI boom. As the author puts it, the report -- which speculates about how the mass displacement of knowledge work could cause a cascade of economic crises -- "is a scenario, not a prediction." The memo has found an audience on social media, where the New York Times reports it circulated widely over the weekend. But though its doom-and-gloom war-gaming may have led to a dip in the S&P 500 on Monday, the Times adds, the market rebounded a day later. "The argument leans heavily on narrative and emotion rather than hard evidence," a Deutsche Bank strategist told the paper. "That doesn't mean it will ultimately be wrong, [but the] vibes-to-substance ratio is undeniably high."

Software, Payments Shares Tumble After Citrini Post on AI Risks

Delivery, payments, and software stocks slid sharply Monday after Citrini Research published a report laying out the potential risks that artificial intelligence could pose to various segments of the global economy. DoorDash Inc., American Express Co. and Blackstone Inc all slumped more than 7%. Shares of other companies name-checked in the article, including Uber Technologies Inc., Mastercard Inc., Visa Inc, Capital One Financial Corp., Apollo Global Management Inc. and KKR & Co. Inc. were all lower by at least 3%. "The sole intent of this piece is modeling a scenario that's been relatively underexplored," a preface to the article, which was published Sunday, said. "Hopefully, reading this leaves you more prepared for potential left tail risks as AI makes the economy increasingly weird." Monday's selloff is the latest in a string of AI-fueled routs that have rippled through US stocks for more than a month. Sectors from software, to wealth management and logistics have all been swept up in recent weeks as investors nervous about the potential disruptions from new AI tools have slipped into a "shoot first, ask questions later" mode. While software companies have been among the hardest hit, insurance brokers, private credit firms, cybersecurity and even real estate services stocks have all been caught up in the so called "AI scare trade." Yet, analysts, strategists and investors have also warned that many of these reactions are exaggerated and are likely overestimating any AI-related risks at this point. "It is a remarkable reaction," said Michael O'Rourke, chief market strategist at Jonestrading. "I have seen this market exhibit incredible resilience in the face of actual negative news. Now a literal work of fiction sends it into a tailspin."

Morgan Stanley predicts AI won't let you retire early: Instead, you'll have to train for jobs that don't exist yet | Fortune

Tech titans and stock market investors are increasingly unified in their forecast that artificial intelligence will permanently eliminate millions of white-collar jobs and render traditional employment obsolete. Software and services stocks have taken a beating, with software multiples pulling back by roughly 33% since late 2025 as investors fret over AI's potential to automate vast swaths of knowledge work. Earlier this year, Elon Musk predicted that AI and humanoid robots will make work completely "optional" within the next 10 to 20 years, ushering in a post-scarcity economy where money itself becomes irrelevant. He joins a growing chorus of tech executives issuing stark warnings about human obsolescence; OpenAI CEO Sam Altman recently cautioned that superintelligence could soon outperform even top corporate executives, while Microsoft AI chief Mustafa Suleyman and Anthropic CEO Dario Amodei have projected that sweeping white-collar automation could arrive in one to five years. Economists remain skeptical of the timeline, noting that the apocalyptic narrative may be as much a tool to justify astronomical tech valuations as it is an impending economic reality. But a new, cross-asset research report from Morgan Stanley offers a remarkably grounding message for anxious employees and jittery markets: most of you won't be permanently unemployed; you are just going to find new jobs, many or most of which don't exist yet. Addressing the widespread concern that AI will "replace millions of jobs and increase unemployment by an equivalent amount," a large team of Morgan Stanley analysts pointed directly to history. Over the past 150 years, sweeping technological shifts -- from electrification and the tractor to the computer and the internet -- have fundamentally altered the labor force, but they "did not replace labor". When the spreadsheet was popularized in the 1980s, for example, it automated tedious financial modeling and reduced the need for certain bookkeeping clerks. However, it simultaneously freed up analysts' time to do more complex work and birthed entirely new financial professions. Similarly, the firm argues, AI will merely change "job types, occupations, and needed skills". "While some roles may be automated, others will see enhancement through AI augmentation and other, entirely new roles will be created," the report said. Rather than a mass extinction event for the white-collar worker, in short, the bank sees the corporate landscape is simply preparing for an evolution. So, what will these new jobs look like? Morgan Stanley outlines several emerging professions that it predicts will soon become corporate staples. As AI becomes central to business strategy, companies are expected to hire executive-level "Chief AI Officers" to guide technology adoption across departments. There will also be a massive surge in AI governance roles focused on data compliance, policy oversight, and information security, particularly in sensitive sectors like healthcare. The tech sector could see the rise of blended roles, such as the product manager-engineer hybrid. Empowered by natural language coding tools, product managers will increasingly engage in "vibe coding" -- prototyping and iterating concepts themselves before handing them off to engineers for deployment. Highly specialized roles could also emerge across various industries. In the consumer sector, "AI personalization strategists" and "AI supply chain analysts" will blend data science with customer experience. In industrials, we will see "predictive maintenance engineers" and "smart grid analysts," while healthcare will demand "computational geneticists" and specialists dedicated to AI diagnostic oversight. For financial markets, the current panic over AI disruption appears premature, if not entirely misplaced, in the bank's view. Morgan Stanley notes that the services and cyclical industries that have recently seen outsized underperformance due to disruption fears make up only about 13% of the S&P 500's market cap. Fortune previously reported on a similar finding from other Wall Street economists: the market appears to be talking itself into a panic that the fundamentals don't justify, a trend likely exacerbated by the increasing number of retail investors in the equities market. Apollo Global Management Chief Economist Torsten Slok warned on Wednesday that the "entire market [is] exposed to a big move," reasoning that the share of S&P 500 names moving more than 10% in a single day has increased, while options activity remains "extremely elevated, consistent with heavy retail speculation and leverage-like exposure." This leaves the market structure "more fragile and more vulnerable to an abrupt, outsized move." The Morgan Stanley report offers welcome reassurance -- but it may be telling a comforting story that doesn't fit the technological and economic realities of 2026. While it's true that past waves of automation created as many jobs as they destroyed, AI may represent a qualitatively different shift, targeting cognitive, creative, and decision-making tasks once thought immune to automation. In a new paper released the same day, two Nobel-winning economists (Daron Acemoglu and Simon Johnson) and another, massively influential one (David Autor, known for his work on "the China Shock") argued that this time really could be different. In "Building pro-worker artificial intelligence," published by The Hamilton Project, they warned that "pure automation technologies" do the opposite of collaborating with workers: "they commodify human expertise, rendering it less valuable and potentially superfluous." The specific stock of specialized, human expertise could become "obsolete" with wide deployment of such technology. While the Morgan Stanley thesis reflects historical optimism, history's lessons may not apply cleanly in a situation with a shift from tools that amplify labor to systems that replace cognition. As warned in the speculative essay by Citrini Research, AI could produce productivity gains that decouple corporate profits from employment even more than in the computing era. If firms can scale output with largely automated workforces, they would have little incentive to rehire at historic rates. Morgan Stanley cites evidence that corporate America is already reaping tangible rewards from AI adoption. By the fourth quarter of 2025, 30% of companies identified as AI "adopters" reported quantifiable financial or productivity benefits from the technology, up from just 16% a year prior. As a result, forward profit margin expectations are actively accelerating for companies successfully utilizing AI. How those margins continue to increase, and how many new jobs those companies create as a result, will bear out whether Morgan Stanley's prediction is right.

The Dow Dropped 800 Points. Was a Viral Doomsday AI Report to Blame?

A 7,000-word hypothetical scenario from Citrini Research about AI disrupting white-collar jobs went viral, causing stocks named in the report to tank. A research report went viral over the weekend. By Monday, the stock market was in free fall. Citrini Research published a 7,000-word hypothetical scenario dated June 2028 that painted a scary portrait of AI disrupting white-collar jobs and sparking financial contagion. The report tapped into a fear: What if AI is so good for the economy that it's actually bad for stocks? Many stocks named in the report tanked. Software firms Datadog, CrowdStrike, and Zscaler each plunged more than 9%. IBM fell 13%, its worst one-day performance since 2000. American Express, KKR, and Blackstone -- all called out by Citrini -- also tumbled. Trade policy uncertainty also played a role in the fall. Still, the market's response to a thought experiment shows how anxious Wall Street has become about AI disruption. Read more

Citrini's AI Doom Report Leads to Tech Stock Selloff

A new report by Citrini Research has been partially blamed for a software and payments stock sell-off on Monday, where it outlined extreme scenarios in which AI could severely disrupt the economy, from wiping out a sizable share of the workforce and slashing consumer spending to threatening the $13 trillion US mortgage market. Citrini was little-known up until Monday, when its "Global Intelligence Crisis" report amassed over 22 million views on X alone and discussed how AI agents could drive corporate profits so high that human labor could become increasingly redundant and trigger a recession. The report lays out a chilling June 2028 scenario, in which the Standard & Poor's 500 is down 38% from its all-time high, unemployment is over 10%, private credit is unraveling and prime mortgages are cracking -- all while AI didn't disappoint, exceeding every expectation. Citrini said the term "Ghost GDP" could emerge, describing it as output that shows up in the national accounts but never circulates through the "real economy." "A single GPU cluster in North Dakota is generating output previously attributed to 10,000 Manhattan office workers," Citrini theorized in a potential June 2028 scenario. The result: a massive white-collar layoff, far less consumer spending and a recession, Citrini said. The macroeconomic uncertainty from AI and other issues, such as US President Donald Trump's tariffs, has not been taken well in the crypto market over the past few months, with Bitcoin (BTC) falling nearly 50% from its $126,080 all-time high in early October, while safe havens like gold continue to rise. Computing and AI company IBM saw its largest single-day drop in 25 years on Monday, tumbling 13.1% to $223.35, while Microsoft, Oracle and Accenture fell 3.21%, 4.57% and 6.58%, Google Finance data shows. Credit card platforms Visa, Mastercard and American Express also fell 4.5%, 5.77% and 7.2% as Citrini said private credit and software-backed loans would face cascading defaults. Investor anxiety was compounded by warnings from renowned risk theorist Nassim Taleb, who said AI could make some software companies bankrupt, while Anthropic said its Claude Code tool can be used to modernize software written in the COBOL language, which handles large transactions for many governments, banks and airlines. Related: How SocialFi, memecoins and AI pushed Base to the top of the L2 ladder Anthropic's findings appeared to affect IBM's share price directly, as COBOL is mostly run on IBM's systems. Citrini said the rise in agentic AI tools like Anthropic's Claude Code or OpenAI's Codex will drive the broad economic shift, reducing the need for human labor and forcing companies to reinvest savings into ever-more capable AI, essentially creating a feedback loop that accelerates workforce displacement and consumer spending decline. However, three multimillionaire tech investors recently said the high costs of deploying AI agents still don't justify replacing many humans, who can perform tasks just as well, more cheaply. Tech investor Jason Calacanis said he is spending $300 per day to run a single AI agent despite it only operating at 10% to 20% of full capacity, while Social Capital CEO Chamath Palihapitiya noted the same problem and said his AI agents need to be at least twice as productive as employees to justify the costs. Billionaire investor Mark Cuban said the economic-constraint argument of AI agents raised by Calacanis and Palihapitiya was the smartest counterargument that he had seen to AI replacing humans.

Decoded: The viral doomsday AI memo that roiled Wall Street

A viral 7,000-word Substack essay by Citrini Research founder James van Geelen sparked a sharp selloff on Wall Street by outlining a hypothetical 2028 "Global Intelligence Crisis." The scenario imagines AI wiping out white-collar jobs, crushing software revenues, straining credit and housing markets, and triggering a deflationary economic cascade. Stock market investors are used to shocks from central banks, Trump and geopolitics - not Substack. Yet a 7,000-word essay by James van Geelen appears to have rattled markets all the same. The founder of Citrini Research published "The 2028 Global Intelligence Crisis" on Sunday, outlining a hypothetical scenario in which accelerating AI adoption leads to widespread white-collar job losses, weaker consumption and mounting financial strain. The essay describes a "deflationary cascade" in which AI doesn't just augment workers, it replaces them so efficiently that it destabilises the broader economy. In a market already jittery about rapid AI developments and heavily concentrated in tech stocks, the scenario struck a nerve. By Monday morning, the post had gone viral across trading desks. What does the post say? Citrini's thesis imagines a near future in which rapidly improving AI agents hollow out software companies,displace white-collar workers, destabilise credit and housing markets, and inadvertently bankrupt the middle class. It stresses that the scenario is a "thought exercise, not a prediction." Still, its chain-reaction logic alarmed investors. The post is written as a retrospective from 2028. In its version of events, AI first drives a surge in productivity and profits before job losses start to weigh on spending and credit. At the heart of Citrini's thesis is a sharp leap in AI capability. It points to increasingly autonomous tools such as Anthropic's Claude Code and OpenAI's Codex as early signs of systems able to execute complex business tasks with minimal human input. The impact would extend beyond software to travel booking, insurance, real estate commissions, and other industries built on transaction "friction." If such agents scale, they could undercut demand for platforms such as Monday.com, Zapier and Asana by allowing companies to manage workflows internally at lower cost. That, in turn, could push vendors like Oracle into sharper price competition. Nor would it stop there. In Citrini's framework, personal AI agents transact directly for consumers, bypassing intermediaries such as Uber and DoorDash. Payment networks, including Visa and Mastercard, could face pressure if transactions shift to lower-cost crypto rails. The common thread: when machines optimise every transaction for efficiency, habitual app loyalty -- a cornerstone of many digital business models-begins to erode. Historically, technologies have created more jobs than they destroyed. Citrini argues AI could prove to be the exception. "AI is now a general intelligence that improves at the very tasks humans would redeploy to. Displaced coders cannot simply move to 'AI management' because AI is already capable of that," the report states. In this scenario, layoffs in software and other white-collar sectors accelerate, and workers cannot easily transition into higher-value roles. Many shift into lower-paying or less stable jobs, putting pressure on wages and weakening consumer spending. That softer demand then feeds back into corporate decisions. Instead of hiring, companies double down on automation to cut costs, reinforcing what Citrini describes as a cycle with no natural brake. The report extends the shock into the private credit and housing sectors. Many software firms have been financed by private-credit lenders based on assumptions of steady long-term revenue. If AI undermines those assumptions, defaults could surge. Asset managers such as Hellman & Friedman and Permira, cited in the report, could face pressure if software-backed loans sour. At the same time, laid-off white-collar workers struggle to service mortgages, triggering housing stress. Combined credit tightening and falling consumer confidence could amplify the downturn. Citrini ultimately sketches a late-2027 crash that wipes out 57% of the S&P 500. Citrini flags what it sees as a growing imbalance: the economy looks healthy on paper, but many households are under strain. In one scenario, large AI companies continue to post strong profits and productivity gains. Given their heavyweight in stock indices and overall output, headline GDP and market indicators remain resilient. The problem, the firm argues, is that machines don't spend. They don't buy homes, cars or everyday services. The result is what Citrini calls "ghost GDP" - economic output that shows up in the data but doesn't filter through to the wider population. That gap between rising corporate profits and squeezed household finances, the firm warns, could heighten social and political tensions, with anger directed less at Wall Street and more at Silicon Valley. Investors were already uneasy about AI disruption. The Substack post sharpened those fears. US software stocks led the slide. Shares of Datadog, CrowdStrike and Zscaler fell sharply, while International Business Machines suffered its worst one-day drop in decades. Private-equity groups KKR and Blackstone, both cited in the report, also declined. The broader selloff, which coincided with renewed trade-policy uncertainty in Washington, pushed the Dow Jones Industrial Average down 1.7%, or 822 points, on Monday. Shares of DoorDash fell about 7% after the note called it a "poster child" for businesses that monetise friction between buyers and sellers. In the scenario, AI agents enable customers and drivers to transact more directly, squeezing margins. On social media, co-founder Andy Fang said the rise of "agentic commerce" would force the company to adapt. "The ground is shifting underneath our feet," he wrote. "So far this year, the stock market has been discounting a scenario in which AI is our Frankenstein monster," said Ed Yardeni of Yardeni Research. His base case is less dire: "We continue to believe that AI is augmenting workers' productivity rather than making them extinct." Also read: IT stock crash wipes out Rs 1.2 lakh crore for LIC & mutual funds in bloodbath not seen since 2008 After the selloff, van Geelen said the report was a scenario, not a forecast. Speaking to Bloomberg, he described it as an attempt to "start a conversation" about a world in which human intelligence is no longer the scarcest resource. Whether that future materialises is unclear. But the episode shows how quickly AI enthusiasm can turn into market anxiety. (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

Economists Challenge Citrini's AI Doom Thesis, Call It 'Allegorical' - State Street SPDR S&P 500 ETF Trust (ARCA:SPY)

Citrini Research's viral "The 2028 Global Intelligence Crisis" note didn't just shake markets -- it triggered a sharp backlash from Wall Street economists and strategists. Now, a growing number of experts are challenging the notion that an AI-driven productivity surge could spiral into mass unemployment, collapsing demand and systemic financial distress. Their message is simple and backed by economic theory: productivity booms historically fuel growth -- they don't end it. And some are warning that investors may be reacting more to narrative than actual data. The Macro Counterargument To Citrini: Productivity Creates Income Front Harbor Macro Research founder Gerard MacDonell argues that Citrini's doom loop logic ignores a basic economic principle: production generates income. MacDonell described Citrini Research's piece as an "allegorical essay" and questioned how many of those circulating it had actually taken the time to read it in full. If AI boosts productivity and profits, that income accrues to someone -- workers, shareholders, capital owners -- and gets spent or invested. "Say's Law invokes the simple point that production generates income and that this income must accrue to someone, who is likely to spend it," MacDonell said. Historically, major technological advances have raised real incomes and expanded demand, even if distribution became uneven. Referencing economist Paul Krugman's concept of the "accidental theorist," MacDonell warned against dismissing established economic reasoning only to construct a more dramatic alternative. He said that the U.S. economy today is supply-constrained and far from a liquidity trap. The Federal Reserve still has room to cut rates if needed. In that environment, a productivity burst would more likely be pro-growth than self-defeating. The idea that productivity automatically destroys demand, he suggests, runs counter to centuries of economic experience. The Power Of A Good Doom Story London-based strategist Joachim Klement framed the backlash in blunt terms: bearish narratives sell. "Investment gurus who sell bearish newsletters make more money selling their newsletters and books than people who sell useful information." Klement points to research from the Ifo Institute showing investors are often willing to pay more for compelling economic narratives than for raw forecasts. In fact, pessimistic narratives can command higher prices among certain investors -- especially those prone to overconfidence or motivated reasoning. "Investors value narratives more than the actual recession forecast," he wrote. In other words, stories travel faster than spreadsheets. That matters when a dramatic allegory -- like Citrini's fictional 2028 debt-deflation spiral -- hits a market already jittery about AI disruption. What The Labor Data Shows 22V Research analyst Peter Williams also questioned whether current data supports the doom spiral narrative. "The Citrini sell-off... dramatically catalyzed on existing and building AI-related fears," Williams wrote, noting that negative scenarios tend to gain traction in fragile markets. But so far, labor data does not show collapse. "There is certainly no sign of a recent or building collapse in hiring intentions," Williams said, pointing to white-collar job postings that have stabilized after more than two years of weakness. Layoff mentions on earnings calls remain well below early 2023 peaks. Job openings in many AI-exposed sectors have been bouncing around similar levels for the past year. If AI substitution were already triggering a self-reinforcing employment spiral, critics argue, forward-looking labor indicators would likely look far worse. Yardeni: AI Augments, It Doesn't Extinguish Veteran strategist Ed Yardeni has also dismissed the apocalyptic framing. "We continue to believe that AI is augmenting workers' productivity rather than making them extinct," Yardeni wrote this week. He described the recent shift in tone around AI as striking: "The good news is that bullish sentiment must be dropping rapidly, as the AI story has morphed from a Roaring 2020s productivity booster to an existential threat to our way of life." According to Yardeni, the greater risk isn't economic collapse, but mispricing -- either overestimating disruption or underestimating productivity gains. What This Debate Really Means The pushback highlights a key dividing line: Does AI shrink the economic pie by destroying labor income faster than demand can adjust? Or does it expand the pie by raising productivity and real output, even if distribution shifts? History leans toward the second. And as several economists argue, the bigger risk may not be artificial intelligence itself -- but the narratives investors build around it. Image: Shutterstock Market News and Data brought to you by Benzinga APIs To add Benzinga News as your preferred source on Google, click here.

People are getting fake news on their phones and that's increasing the risk of a market crash | Fortune

The global economy is facing a distinctly modern macroeconomic threat, one born not from failing banks or collapsing supply chains, but from the screens of mobile devices. Financial markets are demonstrating extreme fragility as sensationalized rumors, fictionalized economic scenarios, and viral "doom-scrolling" on smartphones drive erratic trading behavior. With retail investors now wielding unprecedented market power, experts warn that panic-induced equity corrections sparked by unverified digital narratives could actively drag down global economic growth. The current danger is rooted in a fundamental disconnect between empirical data and public sentiment. As Paul Donovan, Chief Economist at UBS Wealth Management, recently observed, reporting on actual economic realities no longer reflects economic perceptions. Instead, "people judge through the sensationalized media output of their smartphone". The recent volatility was seemingly sparked by a weekend blog post by Citrini Research that went viral across social media platforms, detailing a hypothetical scenario where artificial intelligence rapidly displaces white-collar workers, pushes the U.S. unemployment rate above 10% by 2028, and drives a 38% stock-market correction. The widely circulated post painted a picture of a "Ghost GDP" environment in which corporate output continues to rise through automation, but human consumption completely withers. This in turn creates a catastrophic "negative feedback loop" for the consumer economy that would permanently impair the incomes of prime borrowers and eventually fracture the $13 trillion residential mortgage market. The Citrini post was similar in both reach and tone to another viral essay, an adapted version of which was published in Fortune. That one was written by AI executive Matt Shumer and argued that at the moment, white-collar work represents February 2020, days before the Covid pandemic fully arrived on U.S. shores. Despite Citrini explicitly framing the post as a scenario rather than a firm prediction, the narrative risked mutating into fact as it bounced across investors' mobile devices. Financial analysts noted that the market is jittery, weeks after the so-called "SaaSpocalypse" saw $2 trillion and counting get wiped off software-as-a-service valuations after new capabilities from Anthropic's Claude seemed to make them vulnerable, if not obsolete. In fact, a market crash catalyzed by such viral panic is emerging as the leading threat to near-term economic stability. A Truth Social post from the president sent the market into a frenzy last October, mirroring the more recent global stock sell-offs this past January following reports of Trump enacting punitive land grabs and tariff hikes in retribution of a perceived Nobel Prize diss. Even Moody's Analytics top economist, Mark Zandi, warns of the increased risks thanks to unsubstantiated rumors. "Markets appear increasingly tainted by speculation," Zandi wrote, conveniently on social media. "Markets risk moving in a big way, causality is reversed, and falling asset prices threaten an already vulnerable economy. This is one of those times." "There are times when I feel markets are overdone and increasingly disconnected from the economy," he added. Meanwhile, Apollo Global Management's chief economist Torsten Slok, whose Daily Spark is a widely read, influential jolt of data analysis for market watchers, warned on Tuesday that "tail risks" are rising for the U.S. economy. Slok's proprietary analysis of the GDP -- which is falling -- along with the contribution to growth from AI -- which is rising -- paints a picture full of greater risk. Geopolitics, government debt levels, and rapid changes in interest rates are all risks, he wrote, but "predicting the future path of AI adoption and productivity is particularly challenging." If AI fails to meet expectations, he added, the probability of a recession goes up, but if AI were to trigger a sharp rise in unemployment, that could have a "disruptive impact on the economy and financial markets." Goldman Sachs warned the same day that a sharp stock market correction represents the most significant downside risk to its 2026 GDP growth forecast. Economist Pierfrancesco Mei estimated that a 10% equity price drop, sustained through the second quarter of 2026, would reduce U.S. GDP growth by about 0.5 percentage points, severely weighing on consumer spending and overall business investment. If this equity sell-off were to coincide with AI actually displacing workers without delivering expected productivity gains, it would create a substantial growth headwind, he added. In other words, we are in real danger of talking -- or scrolling -- ourselves into a downturn. This vulnerability is heavily exacerbated by the changing demographics of stock market participation. Once known as the "dumb money," retail investors are no longer a marginalized group; they are a dominant market force. In 2025, individual retail investors accounted for a record-breaking $5.4 trillion in trading activity across stocks and ETFs. Driven by mobile trading apps, online chat groups, and social media communities, millions of Americans are making split-second financial decisions from their phones. For example, high school students are now executing options trades on mobile apps like Robinhood based entirely on daily tech news. As Steve Sosnick, chief strategist at Interactive Brokers, told the Associated Press, "if you put enough ants together, they can move a very big log". When these highly active, digitally connected retail traders act on sensationalized smartphone news en masse, the consequences jump from the digital realm into the real economy. Diane Swonk, chief economist at KPMG, warned that in the current climate, "workers are more anxious, investors more herdlike, and markets... more vulnerable to shocks than headlines suggest". Ironically, the viral narrative triggering this potential market crash is considered incoherent by several leading economists. The Financial Times' Robert Armstrong noted that the Citrini scenario ignores the basic identity of national accounts: if AI is generating massive output, something on the other side -- like consumption or investment -- must also be rising. Furthermore, the Unhedged columnist wrote, corporate investment only makes sense if there is future human consumption to absorb the AI-generated goods. While cautioning that he has a "nonexistent formal education in economics," Armstrong said the hypothetical collapse in consumption just doesn't pass the smell test. Economist Tyler Cowen, a longtime influential financial blogger at Marginal Revolution, argued that the whole idea is "incorrect right off the bat ... Very little of it is based on sound macroeconomic reasoning." In the radical deflation scenario contemplated by Citrini, he argued, there would be no problem of aggregate demand, "even if the social situation feels volatile or uncomfortable." If AI produces a lot more stuff in the future economy, he explained, income would be generated from that and the economy would keep going with prices adjusting. If unemployment surges past 10%, then economics dictates that prices would fall, for instance, even if this resulting distribution of income doesn't please everyone's "sense of morality," Cowen wrote. "I am not saying everyone ends up happy here, but you cannot have a) a flood of goods and services, b) billions accruing to the AI owners, without also c) prices are at a level where most people can afford to buy a whole bunch of things. Otherwise, where do you think all the AI revenue is coming from?" The market is not widely down despite the SaaSpocalypse and the vibe trading that is happening in response to viral essays like Citrini's and Shumer's. The S&P 500 is just weeks removed from an all-time high and is down less than 2% over the past month. The "rotation" taking place away from tech stocks and toward more "boring," value stocks has been dubbed "HALO" by Josh Brown, CEO of Ritholtz Wealth Management. It stands for "heavy assets, low obsolescence" and represents the flipside of the AI-resistant trade, to Cowen's point that aggregate demand doesn't just disappear. UBS' Donovan argued that "economic perceptions" don't match up with "economic realities" in the current zeitgeist. For months a prescient critic of the "affordability" crisis, Donovan argued that U.S. consumers "perceive higher grocery and electricity prices and do not acknowledge lower television or used car prices (because most people have not bought used cars recently)." Donovan's arguments align with the views of Penn Wharton Budget Model Director Kent Smetters, who told Fortune last month that he believes many people are falling victim to the behavioral economics phenomenon known as the "money illusion," where sticker shock essentially clouds the perception of what is in reality increased wealth. "The reality is that, in fact, we have a much higher standard of living than we had even 20 or 30 years ago," he said. (Smetters also argued that "the reality is that AI is not going to be that as impactful as people think.") Ultimately, the recent market trembles reveal less about the immediate dangers of AI and more about the precarious psychology of modern trading. Viral essays are tapping into fears of robots turning on their creators -- a trope dating back centuries -- rather than elucidating present economic conditions. The stock market has reached a point where smartphone rumors can cause significant stock moves, providing further evidence that we are in an expensive market that is simply, in Armstrong's words, "looking for an excuse to fall."

The Stock Market Could Crash in an AI Doomsday Scenario, According to Analysts. Wall Street Is Panicking.

Citrini Research spooked Wall Street this week by outlining a doomsday scenario in which artificial intelligence upends the global economy. The S&P 500 (^GSPC +0.77%), Nasdaq Composite (^IXIC +1.04%), and Dow Jones Industrial Average (^DJI +0.76%) dropped sharply on Monday as investors contemplated a report from Citrini Research about how artificial intelligence could reshape the economy . In recent months, investors have become increasingly concerned that AI code generation tools will disrupt the software industry. The Citrini report extended that anxiety to multiple industries by describing a doomsday scenario in which autonomous machines bring about an economic disaster. While the work is mostly fiction and intended to be through-provoking, it clearly struck a nerve on Wall Street. Here are the important details. Citrini Research says AI agents could lead to an economic disaster The Citrini Research report reads like a movie script. It starts with a flash-forward. The real publication date (Feb. 22, 2026) is struck through and replaced with a future date (June 30, 2028). The fictional work sets the scene by explaining unemployment has topped 10% and the S&P 500 has plunged 38% from its high. How did we get there? Artificial intelligence worked too well. Machines replaced human labor as AI agents became increasingly productive, while never needing sleep, sick days, or health insurance. The impact was most profound among white-collar workers like accountants, lawyers, marketers, software engineers, and systems administrators. So, while economic output continued to grow on paper, white-collar unemployment spiked and consumer spending dropped sharply. That prompted companies to reduce wages for blue-collar workers and increase spending on AI agents, which created a feedback loop without brakes. White-collar unemployment continued to rise and consumer spending continued to fall. Ultimately, many borrowers (even those who once had high-paying jobs and excellent credit scores) began to default on loans. That forced financial institutions to tighten their lending standards, which led to a further reduction in consumer spending. The economy eventually spiraled into a recession and the stock market crashed. The Citrini report ends with a reflection: "We are certain some of these scenarios won't materialized. We're equally certain that machine intelligence will continue to accelerate," the authors state. "As investors, we still have time to assess how much of our portfolios are built upon assumptions that won't survive the decade." History says the AI doomsday scenario detailed by Citrini Research is unlikely Michael O'Rourke, chief market strategist at Jonestrading, expressed surprise about how investors reacted to the Citrini Research report. "I have seen this market exhibit incredible resilience in the face of actual negative news. Now, a literal work of fiction sends it into a tailspin." Indeed, while the Citrini report raises valid questions about how the economy will adapt to AI, the doomsday scenario described is unlikely. While new technologies often boost productivity in a way that causes some degree of strife by displacing workers, the economy has always reached a new equilibrium as businesses restructured around new industries. The most recent example is the internet boom in the 1990s. Mainstream adoption of the internet displaced workers in physical retail, music distribution, print media, video rentals, and travel agencies. But businesses adapted to changes in consumer behavior and new industries took shape, including e-commerce, cloud computing, digital advertising, and streaming media. Those new industries created new jobs, or increased the prevalence of jobs that did not exist at scale before the internet. E-commerce created demand for fulfillment workers, last-mile delivery drivers, supply chain specialists, and web designers. Cloud computing created demand for software engineers, data scientists, and cybersecurity analysts. The internet boom also drove adoption of mobile gaming, social media, ridesharing, food delivery, and fintech services. The AI boom will likely follow a similar path. Some workers will be displaced, but new industries and jobs will be created, some of which we cannot imagine today. Ultimately, people may wonder how previous generations survived without AI. Here's the big picture: Technological innovation has been constant throughout history. Hand-crafted goods were replaced by machine-made goods in the first industrial revolution. Steam-powered production gave way to electrified production in the second industrial revolution. And paper-based systems were replaced by digital systems in the third industrial revolution. Economic prosperity increased every time. Despite upheaval caused by the internet -- including the dot-com crash, which erased 50% of the U.S. stock market's value -- the S&P 500 has still achieved a total return of 2,570% (11.1% annually) since 1995. In other words, history says an S&P 500 index fund is a smart place for patient investors to put their money no matter what the future holds.

AI Disruption Debate Roils Markets and Refocuses Risk | PYMNTS.com

Citrini Research's Sunday (Feb. 22) Substack essay, "The 2028 Global Intelligence Crisis," ricocheted through markets this week, contributing to an estimated $300 billion sell-off as investors reacted to a stark hypothetical: a near-term future in which agentic AI sharply reduces the value of white-collar labor, pushes unemployment above 10% and drives a 38% drawdown in the S&P 500 from 2026 highs. Written as a fictional macro memo set in June 2028, the piece argued that AI-driven productivity would generate what it calls "ghost GDP," economic output that appears in statistics but fails to circulate as wages or consumer spending. Enterprise software firms, delivery marketplaces such as DoorDash and Uber, and payment networks including Visa and Mastercard were cited as business models vulnerable to AI agents that comparison-shop, write code autonomously or reroute transactions around fee-based networks. Bloomberg reported that Citrini founder James van Geelen described the post as "a hypothetical economic plunge in which mass white-collar layoffs create a deflationary cascade that pushes the unemployment rate above 10% while stock prices are wiped out." Shares of companies named in the report fell on Monday (Feb. 23). Van Geelen said he did not anticipate the scale of the reaction. "If I thought that stocks were gonna move on this, I wouldn't have made it free," he told Bloomberg. He added that "the market is clearly jumpy about this" and that the article "served as a focus point for investors who were already concerned about the second-order disruption to incumbents by AI." Alap Shah, co-author of the report, framed the memo as a warning exercise rather than a forecast. According to Bloomberg, the report was meant "to prevent anything like what's described in the article from coming to pass." The authors acknowledged uncertainty, saying they "couldn't get to the point where we were comfortable saying there's a 0% chance that something like this happens." The Wall Street Journal described the essay as a "fictional memo from the future," underscoring its narrative structure. The Financial Times wrote that the sell-off reflected growing "anxiety about AI disruption," rather than new company-specific deterioration. "The argument leans heavily on narrative and emotion rather than hard evidence," Jim Reid, a strategist at Deutsche Bank, said of the report. "That doesn't mean it will ultimately be wrong." But he added that the "vibes-to-substance ratio is undeniably high." The memo rests on two central assumptions: that agentic AI will sharply reduce white-collar employment, and that this displacement will occur fast enough to weaken consumption before new jobs or policy responses stabilize demand. Noah Smith, writing in Noahpinion, called the piece "just a scary bedtime story," arguing that it strings together worst-case outcomes without a clear macro model for how income, demand and policy response would interact. A jump in unemployment above 10% would historically prompt fiscal intervention or monetary easing. The memo gives limited attention to those counterweights. The corporate examples similarly assume rapid friction removal. Visa and Mastercard operate regulated global settlement systems tied to fraud management and compliance. DoorDash and Uber rely on physical logistics networks. Enterprise software contracts often involve multi-year commitments and procurement cycles. Institutional and regulatory frictions can slow technological substitution. Joshua Brown, chief executive of Ritholtz Wealth Management, in a podcast argued that its chain of outcomes was overly linear. "Every single negative piling on top of each other without an offset in sight- that is very rarely how these things end up," he said. Brown framed his critique around how economies evolve. "If you think of businesses as just solutions to problems," he said, "then what this piece is saying is that we're going to run out of problems." He added, "In 100,000 years of the evolution of human society, do we ever actually run out of problems to solve?" He pointed to historical job displacement as context. "There were people who used to sit on an elevator all day," he said, describing elevator operators who manually ran lifts. "Is anyone like, 'What happened to all the good elevator operator jobs?'" Entire job categories disappeared, but new industries emerged in their place. Brown's point is less about denying disruption and more about how it unfolds. Investors are pricing a synchronized shock, where job losses, margin pressure and demand collapse hit simultaneously. History rarely works that way.Technological change tends to move unevenly, industry by industry, with losses in one area creating capacity and opportunity in another. Removing friction does not eliminate work; it changes where it happens. Economies do not run out of problems to solve; they reorganize around new ones. None of this negates Citrini's central insight. AI can erode friction-based moats and redistribute economic surplus. If agentic systems reduce paid seats in enterprise software, compress payment fees or intensify competition in marketplaces, margins will feel pressure. Markets are rational to examine those risks.

Yardeni Pushes Back On Citrini's AI Apocalypse, Keeps S&P 500 10,000 Target In Play Yardeni Pushes Back On Citrini's AI Apocalypse, Keeps S&P 500 10,000 Target In Play - Ares Management (NYSE:ARES), Blackstone (NYSE:BX)

Veteran Wall Street strategist Ed Yardeni is pushing back against the market panic sparked by a viral research note warning that artificial intelligence could trigger a self-reinforcing economic collapse. On Monday, Citrini Research published a provocative thought experiment titled "The 2028 Global Intelligence Crisis." The piece -- written as a fictional macro memo from the future -- outlined a scenario where AI-driven productivity turns from market tailwind into economic wrecking ball. The market listened. On Monday, software stocks - tracked by the iShares Tech-Expanded Software Sector ETF (NYSE:IGV) - plummeted nearly 5%. What Citrini Research Said About AI Citrini's core thesis is deceptively simple: what if AI bullishness keeps being right... and that's exactly the problem? In its hypothetical scenario, AI agents rapidly replace white-collar workers. Companies cut payroll, funnel savings into more AI compute, improve margins, and then cut more workers. The result is what the firm calls a "negative feedback loop with no natural brake." Productivity surges. Corporate profits initially expand. Equity markets rally. But household income -- especially among high-earning professionals who drive discretionary spending -- weakens. Consumer demand softens. Software companies face pricing pressure as AI lowers barriers to building in-house tools. Private credit starts to wobble as growth assumptions tied to recurring SaaS revenues deteriorate. Eventually, the hypothetical 2028 memo shows unemployment rising above 10% and the S&P 500 down nearly 40% from prior highs. "The unemployment rate printed 10.2% this morning, a 0.3% upside surprise. The market sold off 2% on the number, bringing the cumulative drawdown in the S&P to 38% from its October 2026 highs," Citrini Research wrote. According to Citrini Research, AI disruption could shift from something "contained" and "sector-specific" to broad-based economic distress in less than two years. Yardeni's Rebuttal: AI Augments, It Doesn't Extinguish Yardeni isn't buying the doomsday narrative. In a note published Tuesday, he suggested the market has recently been flirting with the idea that AI could morph into a "Frankenstein monster." But he flatly rejected the extinction storyline. "We continue to believe that AI is augmenting workers' productivity rather than making them extinct," Yardeni wrote. He also emphasized that AI remains "artificial but not intelligent" in the human sense -- its outputs may sound sophisticated, but the models don't truly understand meaning. That distinction, in his view, is critical -- and a key reason he resists the idea that AI will rapidly replace the bulk of white-collar work. "The good news is that bullish sentiment must be dropping rapidly, as the AI story has morphed from a Roaring 2020s productivity booster to an existential threat to our way of life," he added, implying that excessive pessimism could itself become a contrarian signal. Importantly, Yardeni hasn't walked back his long-term equity outlook. He continues to project that the S&P 500 could reach 10,000 by the end of the decade. In his framework, AI lowers costs, boosts output and unlocks entirely new business models -- much like prior technological revolutions did. Certain roles may shrink, he acknowledges. But history suggests innovation tends to reallocate labor rather than eliminate it outright. Where Citrini Could Be Right -- And Where It May Be Going Too Far Citrini Research raised real concerns about the disruptive effects of AI on the economy. SaaS companies could lose pricing power if clients believe AI lets them build tools in-house. Businesses that rely on fees, renewals or consumer inertia may see margins shrink as AI reduces friction. And if high-income workers are hit hardest, consumer spending could slow more than headline job numbers suggest. Markets often react to expectations before the damage fully shows up in the data. But the worst-case scenario assumes a lot: that companies replace workers almost overnight, that displaced employees can't adapt, that spending collapses instead of shifting, and that policymakers sit still. History shows technology usually hurts some sectors while creating new ones. If AI lowers costs across industries, it could also boost productivity, lower prices and spark new demand -- not just destroy income. That's why this debate matters. If Citrini Research is right, white-collar-heavy sectors face lasting pressure. If Yardeni is right, AI fuels a new earnings cycle and supports higher stock prices. The real question isn't whether AI changes the economy -- it's whether it ultimately makes it smaller or stronger. That distinction could decide whether the next decade looks like a productivity boom... Or the stress test Citrini just wrote from the future. Market News and Data brought to you by Benzinga APIs To add Benzinga News as your preferred source on Google, click here.

AI Unease Leads Software Firms to Pause Debt Deals | PYMNTS.com

By completing this form, you agree to receive marketing communications from PYMNTS and to the sharing of your information with our sponsor, if applicable, in accordance with our Privacy Policy and Terms and Conditions. This trend is happening amid mounting pressure from artificial intelligence, which has threatened the business model of these software companies, Reuters reported Monday (Feb. 23), citing industry sources. According to the report, software companies have already paused or held off on fundraising because lenders and investors expect industry upheaval from AI. "We expect AI disruption risk to be increasingly reflected over 2026 to early 2027, particularly for lower‑quality credit sectors with elevated refinancing needs -- and more so in the U.S. than in Europe," Matthew Mish, UBS' head of credit strategy, told Reuters. Leveraged loans, particularly for American tech companies, have begun to price modestly higher defaults, the report said. UBS expects defaults to tick up 3% to 5% in a scenario of faster market disruptions, compared with market expectations of a 1% to 2% increase. "The disruption is going to play out over two years," Mish said. "We ultimately think that the market will price in a majority, but not all of the defaults that we're forecasting." An example of the way AI appears to be disrupting the software sector played out last week, when Anthropic released a new security feature for its Claude model, and several cybersecurity firms saw their share prices fall. A report on this trend from Bloomberg News noted that investors are concerned that the ability to "vibe code," or use AI to write software code, will allow software customers to develop their own applications, weakening demand for legacy products. But as PYMNTS covered last year, research has found that vibe coding is not about to supplant human software developers anytime sooner. According to that report, researchers have shown that agentic AI models like Claude operated best when developers reviewed outputs after once key checkpoints had been reached, instead of running fully autonomous sessions. "Without those checkpoints, the models produced longer, less maintainable codebases and missed security constraints," PYMNTS added. Meanwhile, PYMNTS wrote recently about the role AI agents are playing in the software-as-a-service space. As these agents perform the duties of human employees, the connection between worker headcount and software revenue is growing weaker. "Instead of charging per user, vendors are increasingly experimenting with pricing tied to tokens consumed, workflows executed, transactions processed, or measurable business outcomes delivered," PYMNTS wrote. "The shift represents a structural recalibration of SaaS economics rather than its demise."

Tech stocks shake off panic over AI 'doomsday scenario' where...

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.

AI Scare Trade Continues to Rattle Investors and Consumers | Investing.com UK

The AI scare trade is gathering pace and it deserves serious attention from both investors and consumers, particularly after the sharp selloff in software and payments stocks this week following the publication of a high-profile report examining the economic risks of artificial intelligence. What began as enthusiasm about efficiency gains has evolved into a far more sober reassessment of how AI and tech will redistribute margins, alter competitive advantages and expose vulnerable business models across logistics, financial services, private capital and beyond. Recent market action makes clear that capital is being repriced around structural implications rather than quarterly earnings noise. For more than a year, artificial intelligence was largely treated as an upside catalyst, with valuations reflecting expectations of productivity gains and cost savings. Now displacement risk is being actively incorporated into pricing models, and that transition is forcing investors to reconsider which revenue streams are genuinely defensible. Wealth management offered an early example of this dynamic. The launch of AI-driven planning tools capable of generating personalised strategies within minutes demonstrated how quickly elements of domestic, single-jurisdiction advice can be systemised. Routine tax optimisation and template-based financial planning can now be delivered more efficiently and at lower cost, and that development is unlikely to reverse. Firms whose core value rests primarily on repeatable workflows are therefore facing legitimate pressure on fee structures. Yet drawing sweeping conclusions about the erosion of entire industries would be analytically flawed. An algorithm operating within a single tax code functions inside a contained system, whereas many clients operate across multiple jurisdictions, currencies and regulatory environments. Residency rules evolve, bilateral tax treaties change, capital gains treatment varies significantly and regulatory divergence between major economic blocs continues to widen. Strategic structuring of wealth across borders involves coordination of legal, fiscal and political variables that shift over time and interact in complex ways. Geopolitical fragmentation adds another layer of difficulty. Trade disputes, sanctions regimes, regional conflicts and debt-driven fiscal adjustments influence capital flows, asset allocation and currency exposure in ways that demand informed judgement. AI can analyse historical and real-time data at extraordinary speed, but it does not independently interpret political risk or anticipate how future policy responses may reshape long-term financial structures. Human oversight and experience remain critical when complexity rises rather than falls. The broader AI scare trade reflects a similar reassessment across sectors. In logistics, automation improves route optimisation and demand forecasting, potentially compressing margins for intermediaries whose differentiation rests on information advantages. In software, code generation and customer support functions are evolving rapidly, challenging pricing models tied to labour intensity. In payments, advanced models enhance fraud detection and transaction processing, but also raise questions about how sustainable legacy fee structures may be in an environment of heightened efficiency. The essential question for investors is whether artificial intelligence strengthens a company's competitive position or undermines the scarcity value of its core offering. Businesses that integrate AI and tech to deepen client relationships, expand geographic reach and enhance governance frameworks are likely to emerge stronger. Those reliant on narrow, process-driven services without meaningful barriers to entry face more significant headwinds as transparency increases and automation reduces cost asymmetries. This environment is also likely to accelerate consolidation. Operators with diversified capabilities, strong balance sheets and international infrastructure are structurally better equipped to absorb margin pressure and invest in advanced systems. Smaller firms with limited scale may struggle to defend pricing power as technological diffusion narrows operational advantages. For consumers and clients, heightened scrutiny of service providers becomes essential. Evaluating whether an adviser or platform operates across jurisdictions, understands evolving regulatory frameworks and combines advanced tools with robust human oversight is no longer optional. Scale, governance standards and cross-border expertise provide resilience at a time when uniform services are increasingly commoditised. The current repricing signals the emergence of a more selective phase in global markets. AI will continue to reshape industries, but its impact will not be uniform. Services that are easily standardised will experience compression, while complex, internationally coordinated and judgement-intensive activities will retain strategic value. Investors and consumers who recognise this distinction early and align themselves with organisations built to operate within complexity, rather than merely process data efficiently, will be better positioned as AI and tech continue to redefine pricing power, competition and capital allocation across the global economy.

Skittish investors spooked as dystopian AI outlooks go viral

SINGAPORE, Feb 24 (Reuters) - An imagined dystopia of mass unemployment fuelled by artificial intelligence, highlighted in Citrini Research's now viral report, has unsettled global markets, where a recent huge bet on the technology is starting to show cracks. The report, the latest in a series of gloomy "think pieces" on the disruptive potential of AI, envisions a 2028 scenario where unemployment rises to 10.2%, triggered by layoffs as AI rapidly turfs out software and delivery applications. This hypothetical downturn, compounded by mortgage and private-equity loan defaults, could send shockwaves through financial systems, sending U.S. stocks tanking, stalling credit markets and the broader economy. The Citrini report has struck a chord with markets unnerved by AI's potential negative impact. Investors have dumped the shares of software companies and those in sectors vulnerable to automation. The U.S. software shares index is down 24% so far this year . "AI capabilities improved, companies needed fewer workers, white collar layoffs increased ... it was a negative feedback loop with no natural brake," Citrini report author Alap Shah wrote. Similar big-picture concerns ran through blogs have circulated among investors this month - one by Matt Shumer, the CEO and co-founder of AI firm Otherside AI - about the scale of AI's disruptive power. Shumer says the impact of AI could be "much bigger" than the 2020 COVID crisis that upended everything from global supply chains to the labour force and education. Damien Boey, portfolio strategist at Wilson Asset Management in Sydney, noted that the market remains uneasy as it juggles cyclical signs of potential gains in risk assets against possible shock unreflected in conventional macro trends. "The Citrini piece has struck a nerve in this regard," he added. WINNERS AND LOSERS EMERGE While global equity markets remain near record highs, this masks a massive rotation out of many AI-exposed companies into either defensive stocks or the profitable corners of the supply chain. Since peaking last October, the S&P 500 software and services index is down more than 30% while Asia's chip-making giants have soared. TSMC is up 30% over the same period and shares in South Korea's Samsung Electronics and SK Hynix have doubled. "AI is real...the divergence is real and the sell off in (software) makes sense as AI will force software coding to go to zero," said Christopher Forbes, head of Asia and Middle East at CMC Markets. "Those in the supply chain will win - chips, data centres, permanent energy." The next test for markets comes with AI bellweather Nvidia's Wednesday earnings. EXPERTS URGE MEASURED RESPONSE Others stressed that as fear dominated, the positives of AI for the global economy were overlooked. "I would take it seriously, not literally," said Nick Ferres, CIO at Vantage Point Asset Management, who said criticism of the Citrini report, for underplaying the economy's ability to adapt, was also valid. In his piece, Shumer noted that the "single biggest advantage" workers could gain is to act early both in terms of understanding and adapting to AI. In another piece dated Feb 17, the CEO of financial software and data firm ION Group, Andrea Pignataro, said markets should not panic over whether AI will replace software tools, but instead panic over what happens when institutions discover they have been teaching AI "to play without them." "So far this year, the stock market has been discounting a scenario in which AI is our Frankenstein monster," said Ed Yardeni of Yardeni Research. "We continue to believe that AI is augmenting workers' productivity rather than making them extinct." (Reporting by Tom Westbrook; Additional reporting by Gregor Stuart Hunter in Taipei; Writing by Dhara Ranasinghe; Editing by Amanda Cooper and Andrei Khalip)

Software companies face higher borrowing costs, tougher scrutiny as AI threatens businesses

Feb 23 (Reuters) - Software companies are delaying debt deals as higher borrowing costs and tougher scrutiny from lenders weigh on the sector, at a time when mounting pressure from artificial intelligence threatens their business models, industry sources said. Software firms both in the U.S. and elsewhere have already paused or postponed fundraising efforts as lenders and investors expect AI to upend the industry. These concerns have been underscored in loan markets, where spreads for risky companies have started to price in more defaults. AI jitters also affected private capital manager Blue Owl, whose shares slid after its latest move to sell $1.4 billion in assets to return money to investors. "We expect AI disruption risk to be increasingly reflected over 2026 to early 2027, particularly for lower-quality credit sectors with elevated refinancing needs -- and more so in the U.S. than in Europe," said Matthew Mish, UBS' head of credit strategy. Leveraged loans, especially for U.S. tech companies, have begun to price modestly higher defaults. UBS expects defaults to rise 3% to 5% in a scenario of quicker market disruptions, compared with market expectations for an increase of 1% to 2%. "The disruption is going to play out over two years," Mish said. "We ultimately think that the market will price in a majority, but not all of the defaults that we're forecasting." Even those companies whose debt is deemed higher quality and less vulnerable to the impact of AI have held off on tapping markets until trading levels recover, one banker said. The market will closely watch investor reception to Qualtrics, a well-established software maker whose lenders will be in the market next month to raise a $5.3 billion acquisition financing package for its purchase of rival Press Ganey Forsta, a source familiar with the matter said. Qualtrics declined to comment. Press Ganey did not immediately respond to a Reuters request for comment. LEVERAGED LOANS The potential disruption from AI is having a bigger impact on more leveraged loan deals than high-yield bond deals, according to two bankers who declined to be identified discussing transactions. Technology industry borrowers, of which 60% are in software, account for the largest portion of leveraged loans, according to Brendan Hoelmer, head of U.S. default research at Fitch Ratings. Tech loans represent 17% of outstanding loans in the leveraged market, valued at $260 billion. Meanwhile, tech borrowers make up just 6% of outstanding high-yield bonds totaling $60 billion, Hoelmer noted. Of those, 70% are to software borrowers. A majority of the software sector's exposure is tied to lower credit ratings - with 50% of the loans holding a "B- or lower" credit rating - loans which typically denote a higher risk of default, Morgan Stanley estimates. Private credit software and services exposure is about 20%, BNP Paribas analysts estimate. U.S. stocks have also been roiled by AI, starting with investors dumping shares of software companies, then companies in sectors vulnerable to automation. The software index is down 20% so far this year. Only 0.5% of outstanding software sector loans are due this year, while 6% are due in 2027, Fitch's Hoelmer said. On the high-yield side, only 0.7% of software debt is due this year and 8% in 2027, he added. Still, companies in the sector that have tried to tap U.S. debt markets have faced significantly higher borrowing costs from banks to underwrite the debt. Banks marketing the loans also are facing more skepticism from potential investors, according to the two bankers. Banks likely will ask for higher yields on new debt and deeper discounts on earlier debt, said the first banker, who declined to be named discussing specific deals. Companies will come off the sidelines when prices improve, the first banker said. Future deals are also likely to include stricter covenants, or legal protections for investors, to get done, the second banker noted. These include maintenance covenants, which force borrowers to keep their debt-to-earnings ratios below specific levels, the banker added. Several planned deals in the tech sector have been pulled or delayed since late January. European digital service provider Team.blue postponed an extension of its 1.353 billion euro ($1.60 billion) term loan from September 2029 and a repricing of its $771 million term loan, according to the first banker. Team.blue declined to comment. There are currently no leveraged loan deals for software companies, as companies and banks wait for trading levels on existing debt in the sector to recover from their losses since late January, when AI disruption fears rose. Meanwhile lower-rated companies with upcoming maturities "are likely to face greater refinancing and default risk in 2026," according to a Moody's Ratings report published in January. "I don't really see software and business services as being hot sectors for issuance over the next year," said Jeremy Burton, portfolio manager on the leveraged finance team of asset manager PineBridge Investments. "The technology is changing so quickly that you've really got to be confident." (Reporting by Matt Tracy and Saeed Azhar, editing by Lananh Nguyen and Diane Craft)