MIT Economist Warns: AI Can Only Handle 5% of Jobs, Fears Potential Market Crash

AI can only do 5% of jobs, says MIT economist who fears crash

Daron Acemoglu wants to make clear right away that he has nothing against artificial intelligence. He gets the potential. "I'm not an AI pessimist," he declares seconds into an interview. What makes Acemoglu, a renowned professor at Massachusetts Institute of Technology, come off as a doomsayer locked in on the mounting economic and financial perils ahead, is the unrelenting hype around the technology and the way it's fueling an investment boom and furious tech stock rally. As promising as AI may be, there's little chance it will live up to that hype, Acemoglu says. By his calculation, only a small percent of all jobs -- a mere 5% -- is ripe to be taken over, or at least heavily aided, by AI over the next decade. Good news for workers, true, but very bad for the companies sinking billions into the technology expecting it to drive a surge in productivity. "A lot of money is going to get wasted," says Acemoglu. "You're not going to get an economic revolution out of that 5%." Acemoglu has become one of the louder, and more high-profile, voices warning that the AI frenzy on Wall Street and in C-suites across America has gone too far. An Institute Professor, the highest title for faculty at MIT, Acemoglu first made a name for himself beyond academic circles a decade ago when he co-authored Why Nations Fail, a New York Times bestselling book. AI, and the advent of new technologies, more broadly, have figured prominently in his economics work for years. The bulls argue that AI will allow businesses to automate a big chunk of work tasks and spark a new era of medical and scientific breakthroughs as the technology keeps improving. Jensen Huang, CEO of Nvidia, a company whose very name has become synonymous with the AI boom, has projected that rising demand for the technology's services from a broader range of companies and governments will require as much $1 trillion in spending to upgrade data center equipment in coming years. Skepticism about these sorts of claims has started to mount -- in part because investments in AI have driven up costs much faster than revenue at companies like Microsoft and Amazon -- but most investors remain willing to pay lofty premiums for stocks poised to ride the AI wave. Acemoglu envisions three ways the AI story could play out in coming years. The most likely? He figures it's some combination of the second and third scenarios. Inside C-suites, there's just too much fear of missing out on the AI boom to envision the hype machine slowing down any time soon, he says, and "when the hype gets intensified, the fall is unlikely to be soft." Second-quarter figures illustrate the magnitude of the spending frenzy. Four companies alone -- Microsoft, Alphabet, Amazon and Meta Platforms -- invested more than $50 billion into capital spending in the quarter, with much of that going toward AI. Today's large language models like OpenAI's ChatGPT are impressive in many respects, Acemoglu says. So why can't they replace humans, or at least help them a lot, at many jobs? He points to reliability issues and a lack of human-level wisdom or judgment, which will make people unlikely to outsource many white-collar jobs to AI anytime soon. Nor is AI going to be able to automate physical jobs like construction or janitorial, he says. "You need highly reliable information or the ability of these models to faithfully implement certain steps that previously workers were doing," he said. "They can do that in a few places with some human supervisory oversight" -- like coding -- "but in most places they cannot." "That's a reality check for where we are right now," he said.

AI can only do 5% of jobs, says economist who fears crash

Daron Acemoglu wants to make clear right away that he has nothing against artificial intelligence. He gets the potential. "I'm not an AI pessimist," he declares seconds into an interview. What makes Acemoglu, a renowned professor at Massachusetts Institute of Technology, come off as a doomsayer locked in on the mounting economic and financial perils ahead, is the unrelenting hype around the technology and the way it's fueling an investment boom and furious tech stock rally. As promising as AI may be, there's little chance it will live up to that hype, Acemoglu says. By his calculation, only a small percentage of all jobs -- a mere 5% -- is ripe to be taken over, or at least heavily aided, by AI over the next decade. Good news for workers, true, but very bad for the companies sinking billions into the technology expecting it to drive a surge in productivity. "A lot of money is going to get wasted," says Acemoglu. "You're not going to get an economic revolution out of that 5%." Acemoglu has become one of the louder, and more high-profile, voices warning that the AI frenzy on Wall Street and in C-suites across America has gone too far. An Institute Professor, the highest title for faculty at MIT, Acemoglu first made a name for himself beyond academic circles a decade ago when he co-authored "Why Nations Fail," a New York Times bestselling book. AI, and the advent of new technologies, more broadly, have figured prominently in his economics work for years. The bulls argue that AI will allow businesses to automate a big chunk of work tasks and spark a new era of medical and scientific breakthroughs as the technology keeps improving. Jensen Huang, CEO of Nvidia, a company whose very name has become synonymous with the AI boom, has projected that rising demand for the technology's services from a broader range of companies and governments will require as much as $1 trillion in spending to upgrade data center equipment in coming years. Skepticism about these sorts of claims has started to mount -- in part because investments in AI have driven up costs much faster than revenue at companies like Microsoft and Amazon -- but most investors remain willing to pay lofty premiums for stocks poised to ride the AI wave. Acemoglu envisions three ways the AI story could play out in coming years. The first -- and by far most benign -- scenario calls for the hype to slowly cool and investments in "modest" uses of the technology to take hold. In the second scenario, the frenzy builds for another year or so, leading to a tech stock crash that leaves investors, executives and students disillusioned with the technology. "AI spring followed by AI winter," he calls this one. The third -- and scariest -- scenario is that the mania goes unchecked for years, leading companies to cut scores of jobs and pump hundreds of billions of dollars into AI "without understanding what they're going to do with it," only to be left scrambling to try to rehire workers when the technology doesn't pan out. "Now there are widespread negative outcomes for the whole economy." The most likely? He figures it's some combination of the second and third scenarios. Inside C-suites, there's just too much fear of missing out on the AI boom to envision the hype machine slowing down any time soon, he says, and "when the hype gets intensified, the fall is unlikely to be soft." Second-quarter figures illustrate the magnitude of the spending frenzy. Four companies alone -- Microsoft, Alphabet, Amazon and Meta Platforms -- invested more than $50 billion into capital spending in the quarter, with much of that going toward AI. Today's large language models like OpenAI's ChatGPT are impressive in many respects, Acemoglu says. So why can't they replace humans, or at least help them a lot, at many jobs? He points to reliability issues and a lack of human-level wisdom or judgment, which will make people unlikely to outsource many white-collar jobs to AI anytime soon. Nor is AI going to be able to automate physical jobs like construction or janitorial, he says. "You need highly reliable information or the ability of these models to faithfully implement certain steps that previously workers were doing," he said. "They can do that in a few places with some human supervisory oversight" -- like coding -- "but in most places they cannot." "That's a reality check for where we are right now," he said.

AI can only do 5% of jobs, says MIT economist who fears crash

By Jeran Wittenstein, Bloomberg News The Tribune Content Agency Daron Acemoglu wants to make clear right away that he has nothing against artificial intelligence. He gets the potential. "I'm not an AI pessimist," he declares seconds into an interview. What makes Acemoglu, a renowned professor at Massachusetts Institute of Technology, come off as a doomsayer locked in on the mounting economic and financial perils ahead, is the unrelenting hype around the technology and the way it's fueling an investment boom and furious tech stock rally. As promising as AI may be, there's little chance it will live up to that hype, Acemoglu says. By his calculation, only a small percentage of all jobs - a mere 5% - is ripe to be taken over, or at least heavily aided, by AI over the next decade. Good news for workers, true, but very bad for the companies sinking billions into the technology expecting it to drive a surge in productivity. "A lot of money is going to get wasted," says Acemoglu. "You're not going to get an economic revolution out of that 5%." Acemoglu has become one of the louder, and more high-profile, voices warning that the AI frenzy on Wall Street and in C-suites across America has gone too far. An Institute Professor, the highest title for faculty at MIT, Acemoglu first made a name for himself beyond academic circles a decade ago when he co-authored "Why Nations Fail," a New York Times bestselling book. AI, and the advent of new technologies, more broadly, have figured prominently in his economics work for years. The bulls argue that AI will allow businesses to automate a big chunk of work tasks and spark a new era of medical and scientific breakthroughs as the technology keeps improving. Jensen Huang, CEO of Nvidia, a company whose very name has become synonymous with the AI boom, has projected that rising demand for the technology's services from a broader range of companies and governments will require as much $1 trillion in spending to upgrade data center equipment in coming years. Skepticism about these sorts of claims has started to mount - in part because investments in AI have driven up costs much faster than revenue at companies like Microsoft and Amazon - but most investors remain willing to pay lofty premiums for stocks poised to ride the AI wave. Acemoglu envisions three ways the AI story could play out in coming years. -The first - and by far most benign - scenario calls for the hype to slowly cool and investments in "modest" uses of the technology to take hold. -In the second scenario, the frenzy builds for another year or so, leading to a tech stock crash that leaves investors, executives and students disillusioned with the technology. "AI spring followed by AI winter," he calls this one. -The third - and scariest - scenario is that the mania goes unchecked for years, leading companies to cut scores of jobs and pump hundreds of billions of dollars into AI "without understanding what they're going to do with it," only to be left scrambling to try to rehire workers when the technology doesn't pan out. "Now there are widespread negative outcomes for the whole economy." The most likely? He figures it's some combination of the second and third scenarios. Inside C-suites, there's just too much fear of missing out on the AI boom to envision the hype machine slowing down any time soon, he says, and "when the hype gets intensified, the fall is unlikely to be soft." Second-quarter figures illustrate the magnitude of the spending frenzy. Four companies alone - Microsoft, Alphabet, Amazon and Meta Platforms - invested more than $50 billion into capital spending in the quarter, with much of that going toward AI. Today's large language models like OpenAI's ChatGPT are impressive in many respects, Acemoglu says. So why can't they replace humans, or at least help them a lot, at many jobs? He points to reliability issues and a lack of human-level wisdom or judgment, which will make people unlikely to outsource many white-collar jobs to AI anytime soon. Nor is AI going to be able to automate physical jobs like construction or janitorial, he says. "You need highly reliable information or the ability of these models to faithfully implement certain steps that previously workers were doing," he said. "They can do that in a few places with some human supervisory oversight" - like coding - "but in most places they cannot." "That's a reality check for where we are right now," he said.

MIT economist says AI can only handle 5% of jobs, fears stock crash

The much-hyped AI takeover of the US job market is likely overblown - and it could hurt the bottom lines of overzealous companies that have invested billions into the technology, according to a prominent expert. Just 5% of jobs will be replaced or heavily assisted by artificial intelligence within the next decade, according to calculations by Daron Acemoglu, an economist and professor at MIT. "A lot of money is going to get wasted," Acemoglu said in an interview with Bloomberg. "You're not going to get an economic revolution out of that 5%." Major corporations have pumped huge sums of money into the pursuit of advanced AI models in recent years. In the second quarter of this year alone, Microsoft, Alphabet, Amazon and Meta Platforms combined to pour more than $50 billion on capital expenditures, with much of the money going toward AI investments, according to Bloomberg's data. The spending frenzy has helped bolster ChatGPT creator OpenAI's valuation to a whopping $157 billion in a round that closed Wednesday - even as the firm bleeds cash. Rival firm xAI, founded by Elon Musk, is already valued at $24 billion in little more than a year since its launch. Acemoglu argues that current AI systems are still too unreliable to be a viable replacement for humans anytime soon - either in white-collar office jobs or blue-collar gigs like construction. "You need highly reliable information or the ability of these models to faithfully implement certain steps that previously workers were doing," Acemoglu told the outlet. "They can do that in a few places with some human supervisory oversight...but in most places they cannot." If the unrestrained spending continues, it could eventually result in a tech stock crash - referred to by Acemoglu as "AI winter" - as the technology falls out of favor with executives. Acemoglu also outlined a more troubling possibility - that companies could spend big to develop AI technology and cut jobs on the expectation that it will reduce their labor needs, only to later reverse course. "Now there are widespread negative outcomes for the whole economy," he said. The MIT professor is one of several experts who have predicted an AI bubble will roil the markets in the near future. In August, investor and strategist David Roche told CNBC that he expects the economy to enter a bear market in 2025. He compared the growing hype around AI to the dot-com bubble of the the early 2000s.

AI Can Only Do 5% of Jobs, Says MIT Economist Who Fears Crash

Daron Acemoglu wants to make clear right away that he has nothing against artificial intelligence. He gets the potential. "I'm not an AI pessimist," he declares seconds into an interview. What makes Acemoglu, a renowned professor at Massachusetts Institute of Technology, come off as a doomsayer locked in on the mounting economic and financial perils ahead, is the unrelenting hype around the technology and the way it's fueling an investment boom and furious tech stock rally.

AI can do only 5pc of jobs, says MIT economist who fears crash

San Francisco | Daron Acemoglu wants to make clear right away that he has nothing against artificial intelligence. He gets the potential. "I'm not an AI pessimist," he declares seconds into an interview. What makes Professor Acemoglu, a renowned professor at Massachusetts Institute of Technology, come off as a doomsayer locked in on the mounting economic and financial perils ahead is the unrelenting hype about the technology and the way it is fuelling an investment boom and furious tech stock rally.

MIT Economist Sounds Alarm On AI Hype: 'A Lot Of Money Is Going To Get Wasted'

Economist Daron Acemoglu of the Massachusetts Institute of Technology, has voiced his apprehensions regarding the ongoing surge in AI investments. What Happened: Acemoglu expressed his concerns that the current enthusiasm for artificial intelligence is resulting in excessive financial commitments, in a Bloomberg interview on Thursday. While not against AI, Acemoglu warns that only about 5% of jobs could be significantly affected by AI over the next decade. This is troubling for companies investing billions with expectations of a productivity boom. He remarked, "A lot of money is going to get wasted," stressing that the expected economic transformation is unlikely to arise from such a small percentage. See Also: Nvidia CEO Jensen Huang Says Demand For Next-Gen Blackwell GPU Platform Insane: 'Everyone Wants To Have The Most, And Everyone Wants To Be First' The economist has emerged as a significant voice cautioning against the AI frenzy that has taken hold of Wall Street and corporate America. Despite skepticism from some quarters, many investors continue to pay high premiums for stocks anticipated to benefit from AI advancements. Why It Matters: The concerns raised by Acemoglu echo fears of a potential AI bubble burst, reminiscent of the dot-com bubble of the late 1990s. The surge in AI interest has driven U.S. stock markets to new heights, with the S&P 500 and Nasdaq Composite Index experiencing significant gains since late 2022. Despite these fears, a recent analysis by Goldman Sachs suggests that the AI tech sector is not in a speculative bubble. However, they emphasize the importance of diversification, given the high concentration risk among leading tech companies, often referred to as the "Magnificent Seven." The extraordinary performance of tech stocks in recent years has been justified by their earnings, according to Goldman strategist Peter Oppenheimer. Read Next: Elon Musk Responds After Y Combinator's Paul Graham Says Twitter Name Change 'Was A Waste Of Time:' 'You Know Nothing' Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors. Image generated by Midjourney Market News and Data brought to you by Benzinga APIs