The S&P 500 (^GSPC 1.31%), Nasdaq Composite (^IXIC 1.56%), and Dow Jones Industrial Average (^DJI 1.40%) dropped sharply on Monday as investors contemplated a report from Citrini Research about how artificial intelligence could reshape the economy .
In recent months, investors have become increasingly concerned that AI code generation tools will disrupt the software industry. The Citrini report extended that anxiety to multiple industries by describing a doomsday scenario in which autonomous machines bring about an economic disaster.
While the work is mostly fiction and intended to be through-provoking, it clearly struck a nerve on Wall Street. Here are the important details.
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Citrini Research says AI agents could lead to an economic disaster
The Citrini Research report reads like a movie script. It starts with a flash-forward. The real publication date (Feb. 22, 2026) is struck through and replaced with a future date (June 30, 2028). The fictional work sets the scene by explaining unemployment has topped 10% and the S&P 500 has plunged 38% from its high.
How did we get there? Artificial intelligence worked too well. Machines replaced human labor as AI agents became increasingly productive, while never needing sleep, sick days, or health insurance. The impact was most profound among white-collar workers like accountants, lawyers, marketers, software engineers, and systems administrators.
So, while economic output continued to grow on paper, white-collar unemployment spiked and consumer spending dropped sharply. That prompted companies to reduce wages for blue-collar workers and increase spending on AI agents, which created a feedback loop without brakes. White-collar unemployment continued to rise and consumer spending continued to fall.
Ultimately, many borrowers (even those who once had high-paying jobs and excellent credit scores) began to default on loans. That forced financial institutions to tighten their lending standards, which led to a further reduction in consumer spending. The economy eventually spiraled into a recession and the stock market crashed.
The Citrini report ends with a reflection: "We are certain some of these scenarios won't materialized. We're equally certain that machine intelligence will continue to accelerate," the authors state. "As investors, we still have time to assess how much of our portfolios are built upon assumptions that won't survive the decade."
History says the AI doomsday scenario detailed by Citrini Research is unlikely
Michael O'Rourke, chief market strategist at Jonestrading, expressed surprise about how investors reacted to the Citrini Research report. "I have seen this market exhibit incredible resilience in the face of actual negative news. Now, a literal work of fiction sends it into a tailspin."
Indeed, while the Citrini report raises valid questions about how the economy will adapt to AI, the doomsday scenario described is unlikely. While new technologies often boost productivity in a way that causes some degree of strife by displacing workers, the economy has always reached a new equilibrium as businesses restructured around new industries.
The most recent example is the internet boom in the 1990s. Mainstream adoption of the internet displaced workers in physical retail, music distribution, print media, video rentals, and travel agencies. But businesses adapted to changes in consumer behavior and new industries took shape, including e-commerce, cloud computing, digital advertising, and streaming media.
Those new industries created new jobs, or increased the prevalence of jobs that did not exist at scale before the internet. E-commerce created demand for fulfillment workers, last-mile delivery drivers, supply chain specialists, and web designers. Cloud computing created demand for software engineers, data scientists, and cybersecurity analysts.
The internet boom also drove adoption of mobile gaming, social media, ridesharing, food delivery, and fintech services. The AI boom will likely follow a similar path. Some workers will be displaced, but new industries and jobs will be created, some of which we cannot imagine today. Ultimately, people may wonder how previous generations survived without AI.
Here's the big picture: Technological innovation has been constant throughout history. Hand-crafted goods were replaced by machine-made goods in the first industrial revolution. Steam-powered production gave way to electrified production in the second industrial revolution. And paper-based systems were replaced by digital systems in the third industrial revolution. Economic prosperity increased every time.
Despite upheaval caused by the internet -- including the dot-com crash, which erased 50% of the U.S. stock market's value -- the S&P 500 has still achieved a total return of 2,570% (11.1% annually) since 1995. In other words, history says an S&P 500 index fund is a smart place for patient investors to put their money no matter what the future holds.
