Is the stock market in an AI bubble?
- AI can only do 5% of human jobs: MIT professor
- Even so, tech companies' stocks have skyrocketed
- Sector has seen sizable layoffs as of October 2024
A currency trader passes under the screen showing the Korea Composite Stock Price Index (KOSPI), top left, and the foreign exchange rate between U.S. dollar and South Korean won, top center, at the foreign exchange dealing room of the KEB Hana Bank headquarters in Seoul, South Korea, Wednesday, June 26, 2024. (AP Photo/Ahn Young-joon)
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(NewsNation) — Artificial intelligence is likely only able to perform 5% of all jobs, despite stock market booms and rising tech layoffs seemingly ringing in a new era for the nation’s technology sector.
That’s according to Daron Acemoglu, a professor at Massachusetts Institute of Technology, who told Bloomberg that only a miniscule portion of all jobs could be taken over, or heavily helped, by AI in the coming years.
“A lot of money is going to get wasted,” Acemoglu said. “You’re not going to get an economic revolution out of that 5%.”
And a lot of money is at stake. Tech stocks are up more than 26% year to date, with powerhouse brands including Apple and Microsoft — whose devices now come equipped with AI features — and NVIDIA, a top designer of the chips used to run AI systems, leading the charge.
As the tech sector rakes in shareholder value amid enthusiasm for its newest plaything, workers are dwindling. Roughly 60,000 employees across 254 companies have been laid off in 2024 so far, according to independent tracker Layoffs.fyi. The newest round of tech departures follows workforce reductions in both 2022 and 2023.
Higher investment, higher stock prices and higher layoffs are typical of stock market bubbles, a phenomenon that spooked many in the sector earlier this summer.
Goldman Sachs says tech isn’t in one yet, though Peter Oppenheimer, chief global equity strategist and head of Macro Research in Europe, writes that “the high concentration does, indeed, pose a risk to investors.”
Typically, investors want a market where many stocks are participating in the S&P 500’s gains, rather than a small few that are all exploring the same next step.
Acemoglu warns that the AI craze on Wall Street has gone too far, even laying out three possible storylines the AI boom could follow:
- Hype settles down, and investments in “modest” uses of AI take center stage
- Fever continues for another year, and the tech stock crash that leaves many disenchanted with the technology (“AI spring followed by AI winter,” he told Bloomberg)
- AI investment goes unchecked, leading to further layoffs and countless dollars poured into the tech “without understanding what they’re going to do with it,” ultimately hurting the entire economy
