Investor fears about AI have reached the point where blog posts have become billion-dollar market movers.
Driving the news: A viral Substack post predicting a future of economic pain caused by AI disruption seemingly sparked a mass market selloff on Monday, sinking the stocks of software firms and other companies mentioned in the essay.
The 7,000-word post, published in the popular finance newsletter Citrini Research, mapped out a scenario where AI induces a crippling financial crisis.
As one former Morgan Stanley analyst put it, “every stock that got mentioned got mauled.” DoorDash fell 6%, Visa and Mastercard were down 4.6% and 5.7%, respectively, and IBM tumbled 13% — its worst one-day performance since 2000.
Catch-up: In Citrini’s near-future scenario, the recent SaaS selloff is just the first tremor of a broader crash. As AI lets companies replicate more software in-house — and slash their contracts with software firms as a result — mass layoffs ensue.
In this feedback loop, better AI drives white-collar layoffs and lower consumer spending, squeezing margins and pushing firms to double down on even more AI.
Yes, but: The theory has its critics, with one commentator dismissing it as nothing more than a “scary bedtime story”. Others pointed out that in this scenario, productivity increases drastically while consumption collapses (which economic theory suggests is unlikely).
Why it matters: Whether it’s realistic or not, the fact that a Substack post full of theoretical scenarios can erase billions of dollars in market value highlights just how emotional, uncertain, and trigger-happy the trading around AI has become.—LA