Citrini Research caused a stir in February when it outlined a scenario in which new technologies could lead to a stock market crash of up to 60%. Similar fears, albeit for different reasons, have also been advanced as to why artificial intelligence could be bad news for investors.<\/p>\n
Overly dramatic or a realistic prospect? Let\u2019s see.<\/p>\n
Doom and gloom<\/p>\n
Citrini paints a picture (the firm describes it as a \u201cscenario, not a prediction\u201d) of white-collar workers being gradually replaced by machines.<\/p>\n
Unemployment rises (the US jobless rate could hit 10% by June 2028) and wages fall. Consumer spending weakens. A doom loop\u2019s created \u2014 or \u201chuman intelligence displacement spiral\u201d \u2014 with more AI leading to further economic disruption.<\/p>\n
With loan defaults rising, banks start to suffer. The whole mortgage system then comes under threat with a property market crash playing a major role in wiping 57% off the value of the S&P 500<\/a>, compared to its October 2026 peak.<\/p>\n And in the face of falling tax revenues and political instability, governments around the world are unable to do anything about it.<\/p>\n The paper concludes: \u201cAs investors, we still have time to assess how much of our portfolios are built upon assumptions that won\u2019t survive the decade. As a society, we still have time to be proactive.\u201d<\/p>\n That\u2019s not all<\/p>\n A second fear surrounding AI is related to events of nearly 40 years ago. The Black Monday crash of 1987 has been partly blamed on automated trading strategies. Four decades later, could AI cause a similar issue?<\/p>\n A third concern is around lofty stock market valuations. Prior to the recent conflict in the Gulf, US equities were trading at record highs relative to earnings. Largely caused by fears of a tech stock bubble forming, some were predicting a market meltdown. Okay, this isn\u2019t the fault of AI itself, but rather, overexuberant investors getting a bit too excited. But it\u2019s another illustration of how technological advances could disrupt the wider market.<\/p>\n Hang in there!<\/p>\n With such a gloomy analysis, it\u2019s tempting to think that it\u2019s time to get out of the market. But I\u2019m not selling up. In fact, I recently topped up my Stocks and Shares ISA<\/a>. Why?<\/p>\n Well, we\u2019ve been here before. AI is the fourth industrial revolution that the world\u2019s seen. And the previous three didn\u2019t wreak havoc overnight. Of course, there are going to be winners and losers. However, I don\u2019t think everyone\u2019s going to suffer.<\/p>\n The world\u2019s largest<\/p>\n