From Bloomberg, March 5:
A new worry is rippling across the stock market lately: entire businesses, not just their employees, may be thrown out of work. While most economists say fears of an AI job apocalypse are overblown, seismic shifts have happened in the past after big tech breakthroughs.
The IT revolution of the 1990s led to a surge in productivity that sped up the US economy for several years. It also rendered companies or even industries largely redundant — from travel agents and stockbrokers to classified advertising and newspapers, or video rental stores.
Economists expect artificial intelligence will deliver higher productivity, which is key to raising growth rates in the long run. But investors are growing nervous about what damage might be done on the way, in capital markets as well as labor markets – especially because AI threatens disruptions on a broader scale than the internet boom.
“Is this time bigger? Yes,” says Anton Korinek, an AI expert at the University of Virginia – perhaps by a factor of 10. “The key difference from the 1990s is that the internet only disrupted information distribution,” says Korinek. “AI disrupts cognitive production at large. That’s a much bigger economic surface area.”
Ultimate Promise
To be sure, all of this is early-days speculation over a fast-changing and largely untested technology, whose ultimate promise is to make workers more productive.Productivity is essentially a measure of how much output workers can deliver with the available tools, so it tends to surge upward when someone invents important new ones like the internet or AI.
Data for the last three months of 2025 is due out later Thursday. Economists typically don’t read too much into one quarter, since the numbers tend to jump around. Still, the trend has been ticking up. After big swings in the pandemic period, productivity has grown at an average pace of 2.6% since the start of 2023. That’s more than double the average for the decade through 2019.
There’s intense debate over how much of this acceleration is due to AI. But even analysts who reckon the new technology isn’t yet making a big contribution mostly expect it will do so before long.
A more productive workforce drives the kind of efficiency gains that can allow both corporations and their employees to boost earnings, without triggering inflation. Historically, economies adapt to big tech breakthroughs – creating new industries and professions that nobody could’ve envisioned before – and living standards rise.
‘How It Has to Be’
That’s the long-run view – which smooths out lots of bumps on the road.
”Having some boom-bust in a sector is normal,” says Simon Johnson, the Nobel prizewinning economist at MIT. “Maybe even how it has to be.” But as companies go under, he says, it can create wider risks – especially if the failed businesses borrowed lots of money. “What you don’t want is to infect the credit, and you definitely don’t want to get inside the banking system.”
As of now, on US capital markets, what’s become known as the “AI scare trade” is barely a blip.
The S&P 500 is up by about two-thirds since the release of ChatGPT in November 2022. A big chunk of those gains has been driven by the surging value of AI companies themselves and their suppliers – giants like Meta Platforms Inc. and Nvidia Corp. – which creates one set of risks if their technology disappoints....
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