THE FUTURE OF AI AND THE STOCK MARKET

Artificial Intelligence (AI) is already reshaping the economy and the stock market, but its full impact is only beginning to unfold.

Current Impact

One of the most visible effects of AI today is the massive investment in data centers required to power AI applications. The biggest players—Microsoft, Meta, Amazon, and NVIDIA—are collectively spending $100 to $200 billion per year on infrastructure. That level of capital deployment is so large that it is meaningfully boosting GDP growth.

Naturally, the stock prices of these tech giants have surged. But the key question remains: will these investments pay off?

So far, revenue models are still developing. Billion-dollar AI service deals are being signed, but revenues haven’t yet caught up with the spending. Investors are increasingly uneasy, comparing today’s AI buildout to the broadband overexpansion of the late 1990s dot-com bubble. Any sign of weak returns could trigger a sharp decline in stock prices.

Future Impact

Over the long term, the real force behind AI’s influence on markets will be productivity gains across the entire economy.

We’re already seeing this: software developers using AI coding tools are many times more productive. Soon, nearly every profession will benefit from custom AI applications, dramatically boosting efficiency.

Here’s a conservative scenario for the S&P 500:

1. 20% increase in labor productivity

2. 10% reduction in supplier costs, as AI makes upstream industries more efficient

3. Stable revenue, as lower prices are offset by increased demand

   
   

These assumptions alone could double corporate profits, leading to a corresponding doubling of stock prices. Even with today’s somewhat stretched valuations, AI-driven productivity easily justifies the current market.

And this may be only the beginning. If productivity were to double—a plausible outcome—profits could skyrocket far beyond current projections.

Societal Impact

But the benefits won’t come without serious challenges. While higher profits and stock prices are great for shareholders, AI’s effect on employment could be devastating.

• In my conservative 20% productivity increase scenario, unemployment could climb to 15–20%—triple today’s acceptable level.

• In a more aggressive AI-and-robotics future, unemployment could approach 50%.

  
  

Without sweeping changes to our economic system, such levels of job loss could collapse both the economy and democracy. Businesses may remain efficient, but too few people will have money to buy their products.

Unfortunately, our political system is poorly equipped for the challenge. If we struggle to deal with the impact of 3% inflation, how will we handle rapidly rising unemployment? Worse, the gradual pace of disruption will allow misinformation and partisan infighting to block real solutions until it’s too late.

The Hard Truth

There’s no way around it: addressing mass unemployment will require higher corporate taxes to fund support for displaced workers.

Yet with corporate lobbyists wielding enormous power in Washington, passing such reforms will be nearly impossible. By the time public pressure forces change, the damage could be severe. If corporations resist contributing, demand for their products will collapse anyway. And if the government turns to printing money instead, we’ll face runaway deficits, inflation, and currency devaluation.

The painful lesson of globalization—where jobs were shipped overseas while leaders failed to act—will look minor compared to the disruption AI brings. The scale and speed of this transformation will dwarf past economic shifts.

Conclusion

I wish I could be more optimistic, but history shows us that societies rarely act proactively—we tend to wait until crises force change. Sadly, the coming AI upheaval may be no different.

These AI concerns are another reason why I honestly believe that my investing system is the best way to manage your retirement money.  The primary objective of my system is to shift your money out of the stock market before big losses are realized.  It works best in any financial meltdown, but it will be the only way to protect you when the AI crisis materializes.

If you want to learn how my investing system can improve your results and protect your life savings, click here to schedule a call.

I am actually a long-term optimist. Humans eventually do the right thing, I believe. We will eventually make the necessary changes and put ourselves on a better path. It will just take some time.

Stay Disciplined My Friends,

Phil

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