A recent anonymous blog post from Citrini Research, a market commentary and research Substack account, triggered a significant sell-off on Wall Street, highlighting the market’s sensitivity to the potential impacts of artificial intelligence. The post, a hypothetical scenario depicting a bleak economic future in 2028 due to AI-driven job displacement, initially sparked debate on social media but quickly translated into tangible market losses.
Software companies were particularly hard hit, with giants like Workday, CrowdStrike, and Datadog experiencing substantial declines. Australian software company Atlassian also suffered, plummeting 10 per cent. Concerns about the software sector’s ability to withstand disruption from AI, which is increasingly enabling even amateurs to create software, have been mounting for months. Simultaneously, private equity firms also faced pressure, with leading companies such as KKR and Blackstone enduring significant losses.
The fear is that the rapid development of AI is bringing previously distant challenges, such as AI-created software and rising job losses, much closer. This makes valuing stocks and sectors exceptionally difficult, as investors struggle to discern true winners from losers amid the disruption. Pinnacle Investment Management’s chief investment strategist, Anthony Doyle, notes the historical difficulty in foreseeing the second and third-order effects of new technologies, investors are recalibrating their views on stocks in real-time.
Despite the turmoil, the S&P 500 only closed down 1 per cent, as investors rotated towards defensive sectors. However, the underlying shift in market sentiment suggests this calm may not last. As Nassim Taleb, author of ‘The Black Swan’, warned of potential software bankruptcies and structurally underpriced tail-risk, the market grapples with uncertainty, and a sense of unease pervades, fuelled by algorithmic trading and viral blog posts.
