AI bubble fears leave Wall Street at odds with workers
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Illustration: Sarah Grillo/Axios
Across the major bank outlooks for 2026, not one calls artificial intelligence a bubble.
Why it matters: Wall Street's view is at odds with that of Main Street, which sees AI as more of an existential threat that could eliminate jobs en masse and destabilize the economy, a perspective that goes beyond valuations.
What they're saying: "In a bubble, you feel amazing," Jacob Manoukian, U.S. head of investment strategy at J.P. Morgan Private Bank, tells Axios.
- But "people understand that AI is going to have consequences" and that "the market is excited about it, because it can have the ability to disrupt labor," he says. That understanding causes a hit to consumer sentiment and a lot of discussion about the bubble.
Zoom in: Workers worried about a bubble may feel that way if they aren't adopting the technology, feeding doubts over whether AI is really all that.
- At a recent lunch with 15 executives in San Francisco, sources told Axios that lack of AI adoption is part of the problem. "The brain is designed to prevent you from adopting these tools," Pär Edin, principal at KPMG, said.
- "Especially those tools that people think will replace them," Barak Turovsky, venture advisor and former chief AI officer at GM, added.
Reality check: These fears are rooted in reality: AI will displace workers.
- JPMorgan estimates that 15% of current jobs will be replaced by AI in the next 20 years, equating to $7 trillion in GDP gains. HSBC sees AI equating to 1% in cost savings in the near term.
Tension point: Let me hold your hand while I say this: Job displacement is the opposite of bubbly.
- Fewer jobs may translate to lower labor costs, fatter margins and stronger earnings. Such cost cutting could be the key for the AI bubble to dissipate rather than pop.
- Companies can grow into their valuations as they cut costs by using the technology, allowing their earnings to soar, justifying their stock prices.
Thought bubble: Multiple sources have joked to me that people should invest as a hedge against their own livelihoods. If AI is taking your job, that means corporate profits are growing, so you might as well find a way to benefit.
- A smart reader sent me an email asking how companies will profit if everyone loses their jobs to AI and can no longer spend money.
- I asked several bankers about this. They said displacement will happen, but it will not be that widespread, and displacement will bring new jobs we have not even imagined yet.
The bottom line: The job fears that make people question the AI bubble are actually the thing that could make it, well, not a bubble at all.
