Could AI Crash the Economy in 2 Years? One Research Firm Says Yes.

Concerns about the impact of artificial intelligence (AI) on individual stocks and sectors have clearly been growing in recent months.

Just one recent example: On Monday, Feb. 23, AI start-up Anthropic PBC announced that its Claude Code tool could modernize COBOL coding language, which is a major asset of International Business Machines (NYSE: IBM). That sent shares of IBM down 13% on the day, its worst single-day loss since 2000.

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But there are suddenly newer, larger concerns about AI surfacing in the market. One is that, by displacing large numbers of white-collar workers, AI could do real damage to the broader U.S. economy within just a couple of years.

Last weekend, investment research firm Citrini Research issued a note titled, “The 2028 Global Intelligence Crisis” that outlined a possible scenario — two years from now — when AI’s displacement of jobs has sent the unemployment rate above 10%, and aggregate demand in the economy has begun to plummet as people lose incomes.

If, like me, you read a lot of investing and macroeconomic commentary, you would have noticed that the Citrini report was all anyone was writing about early in the week. To be sure, the research report’s authors emphasized that what they’ve described is a scenario, not a prediction, but the report spooked markets nonetheless, and the S&P 500 index fell 1% on Monday.

Could such a scenario become the reality? And how should investors prepare for this contingency?

Well, the gist of the Citrini scenario is that AI gets better and cheaper over the next few years. That allows companies to lay off workers, and companies use the savings from doing so to further beef up their AI capability, which lets them lay off more workers. Displaced workers spend less. Companies that sell things to consumers sell fewer of them and so invest more in AI to protect their margins. And so on.

To quote just a small part of the report about what happens in this scenario between early 2026 and 2028:

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.

According to the report, it all resulted in “Ghost GDP” — that is, economic output that shows up in the GDP and productivity numbers and in corporate profits but never circulates through the real economy. Is this dark scenario realistic?

No one knows for sure, of course. But many economists have already poked holes in Citrini’s doom narrative. Some have pointed out that many of the assumptions in the report are wildly speculative. Others have said that Say’s Law (according to which the additional supply of products and services produced with help from AI will create its own demand) will kick in and prevent the scenario . Still others have said that AI could increase overall employment in the economy by providing existing workers with new tools to do their jobs.

For my part, I take frightening headlines and speculative reports with a grain of salt. And I agree with The Motley Fool’s strategy of long-term buy and hold — that is, identifying the companies with good strategies for the long run, as they will be the ones to put AI to work in the hands of their employees.

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Matthew Benjamin has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends International Business Machines. The Motley Fool has a disclosure policy.

Could AI Crash the Economy in 2 Years? One Research Firm Says Yes. was originally published by The Motley Fool