Don’t Believe a Word They Say About AI

Six weeks. 17 full-time jobs – gone... 15 software vendors – fired… An office space – vacated.

The mathematics of AI are brutal.

Last week, I got a call from a friend. He sells subscription packages for flavored coffee creamers. Six weeks ago, he had 19 full-time staff in a swanky office building in a hip part of Austin, Texas.

Today, he has two employees. No physical location. And he eliminated all his software vendors. What happened six weeks ago? He downloaded a single piece of AI software.

He told me he didn’t do it because he wanted to. He did it because his competitor did it first.

I’ve been covering financial markets since the late 1980s. I’ve seen the savings and loan crisis… the dotcom bubble burst… the 2008 housing collapse… and the pandemic crash.

I’ve never seen technological disruption of this scale.

What happened with my friend isn’t an outlier. It’s a preview of what’s coming across most industries. And while tech billionaires tell you AI will make your life an incredible utopia – the reality is far grimmer.

According to Goldman Sachs, AI could replace 300 million jobs. Bad for Main Street… But party time for Wall Street.

That’s because when a company uses AI effectively, it cuts costs (jobs) while output stays the same. That expands their profit margins, which they can use to undercut competitors and grow.

That’s great for the companies that use AI, but terrible for the folks who will lose their jobs. To add insult to injury, many of the companies those folks have chosen to rely on to fund their retirement are the exact wrong names to own.

On paper these stocks are incredible businesses. The massive tech names like Microsoft, Meta and Oracle are the ones powering this AI boom. And they’re truly great companies. But they’re trading at terrible prices.

Let me explain.