AI brings "creative destruction", Wall Street is currently experiencing a "Kodak moment" again.

Recently, a new worry is spreading in the US stock market: not only are employees facing unemployment, but the entire companies could face elimination. Although most economists believe that concerns about job doomsday caused by artificial intelligence are exaggerated, significant industry disruptions have indeed occurred after major technological breakthroughs in the past. The information technology revolution in the 1990s brought about a surge in productivity, propelling rapid economic growth in the United States within a few years. However, it also led to many companies and even industries becoming redundant - from travel agencies and stockbrokers to classified ads and newspapers, and then to video rental stores. Economists expect artificial intelligence to increase productivity, which is essential for long-term economic growth. But investors are increasingly concerned about the damage that artificial intelligence development may cause to capital markets and labor markets - especially because the disruptive impact of artificial intelligence far exceeds the prosperous internet era. Anton Korinek, an artificial intelligence expert at the University of Virginia, said, "Is this time bigger? Yes - maybe ten times the last time. The key difference from the 1990s is, back then, the internet only changed information dissemination, while AI completely changes cognitive production. The economic scope involved is much larger." It can be said that all of these are just early speculations on a rapidly changing and largely untested technology, whose ultimate goal is to improve worker productivity. Productivity essentially measures how much output workers can generate using existing tools, so when important new tools like the internet or artificial intelligence are invented, productivity tends to increase significantly. The productivity data for the last three months of 2025 in the United States will be released later on Thursday. Economists usually do not overinterpret quarterly data because numbers tend to fluctuate. However, the overall trend has been upward. After experiencing significant fluctuations during the pandemic, since early 2023, the average growth rate of US productivity has been 2.6%. This is more than twice the ten-year average growth rate up to 2019. There is currently a fierce debate about how much of this accelerated development can be attributed to artificial intelligence. But even analysts who believe that this new technology has not made a significant contribution mostly expect it to play a vital role soon. Higher labor productivity can bring about efficiency improvements that increase income for both companies and their employees without causing inflation. Historically, economies have often adapted to major technological breakthroughs by creating emerging industries and occupations that were previously unimaginable, thereby improving living standards. How to proceed? Simon Johnson, a Nobel laureate in economics from the Massachusetts Institute of Technology, said, "It's normal, perhaps even inevitable, for an industry to have cycles of booms and busts." However, he stated that as companies close, it could trigger more widespread risks, especially if the failing companies have borrowed substantial capital. "The last thing you want to see is an impact on the credit market, you definitely don't want to get involved in the banking system." At present, so-called "artificial intelligence panic trades" in the US capital market are almost negligible. Since the release of ChatGPT in November 2022, the S&P 500 index has risen by about two-thirds. Much of this increase has been driven by the market value surge of artificial intelligence companies and their suppliers (such as Meta Platforms (META.US) and NVIDIA Corporation (NVDA.US)), but a series of risks could arise if their technologies disappoint. But there is another set of factors - also a reason behind recent market fluctuations - that differ. These factors arise from the possibility that artificial intelligence may indeed bring about the expected leap in productivity, possibly exceeding expectations. An obscure company called Citrini outlined this view in a research report, which led to a brief plunge in the S&P 500 index early last week. Citrini envisaged a large-scale white-collar layoff caused by artificial intelligence, a plot that is essentially science fiction set in 2028. There is currently no sign of such a situation occurring, as the US unemployment rate is at historical lows. However, Daniel Keum of Columbia Business School researched how automation technologies like artificial intelligence are changing the power dynamics within companies, and he believes signs of this shift are already visible. Based on comments from earnings conference calls and annual reports, he found that bosses are increasingly seeing employees as costs, just one of many signs of power shifting towards employees. Keum stated that even if companies are not laying off or reducing salaries at present, they may cut back on benefits such as healthcare, remote work, or even free snacks. "These extra benefits are the first to go; after that, your salary may be reduced." Industry replacement brought by AI is "the essence of capitalism" When companies can use technology to increase efficiency and reduce wage costs, it is generally good news for their profits and shareholders. Take the example of Block, a fintech company operated by Twitter founder Jack Dorsey, which announced on February 26 that it would lay off nearly half of its workforce to capitalize on the productivity boost brought about by artificial intelligence. Since then, its stock price has risen by over 15%. However, there was also an example last week that showed how productivity improvements could have negative implications for investors - including the long-standing IBM. A startup called Anthropic claimed that its artificial intelligence tool could modernize obsolete programming language Cobol running on IBM computers, a task that previously required "many consultants." As a result, IBM's stock price recorded its largest decline in 25 years before recovering most of the lost ground. During past periods of technological prosperity, some well-known companies also declined - such as camera manufacturer Eastman Kodak Company and video rental chain Blockbuster, both of which were phased out by the internet. All of this aligns with the concept of "creative destruction" proposed by economist Joseph Schumpeter, which drives progress. Richmond Fed President Tom Barkin, when asked about whether the Federal Reserve should actively address the impact of artificial intelligence on businesses and labor markets, referenced this concept. He said, "This has been happening in this country for several hundred years. It's part of the essence of capitalism." However, this may not necessarily provide comfort to industries, their investors, and employees facing short-term risks. Korinek of the University of Virginia listed some at-risk industries, including back-office services, content production, customer support, legal and financial analysis, and programming. He said, "Ultimately, any company that relies on human professional knowledge that can be replicated by artificial intelligence will be affected. Risks during the transition period may include stranded assets, excessive debt burdens, and sharp market adjustments."