Will AI really accelerate the economic crisis?

Author: The Kobeissi Letter

Translation: Jiahua, ChainCatcher

The stock market just wiped out $800 billion in market value because “AI is taking over the world” is becoming a consensus. But this view is too obvious. And such “obvious” trades often don’t win.

The reason why doomsday narratives are popular is because they tap into an intuitive fear. They don’t see AI as a productivity tool but as a destructive force that could trigger a macroeconomic negative feedback loop: unemployment leads to weak consumption, which in turn prompts more automation, ultimately accelerating unemployment.

It’s obvious: AI is not just another software feature or efficiency boost. It’s a general capability disruption, impacting every white-collar workflow. Unlike any revolution in history, AI is simultaneously “getting better in all aspects.”

But what if the doomsday scenario is wrong? It assumes demand is fixed. It assumes productivity gains won’t expand the market. It assumes the system’s adaptation speed can’t outpace the shock.

We believe the market is severely underestimating the second path. Signs of a seemingly systemic collapse triggered by Anthropic’s “shock event” could ultimately herald the start of the largest productivity expansion in history. Save this analysis and revisit in 12 months. This scenario isn’t guaranteed to happen, but remember: humans always adapt, and free markets always adjust.

Anthropic’s Impact Is Real

We can’t ignore market reactions. Anthropic, through Claude, is disrupting various industries, causing Fortune 500 companies to lose hundreds of billions in market value. The script for 2026 has played out multiple times: Anthropic releases new tools → Claude significantly improves coding and automation capabilities → stocks in related industries plummet within hours.

Examples:

• As Claude optimizes COBOL code, IBM records its biggest single-day drop since October 2000

• Due to generative capabilities compressing creative workflows, Adobe has fallen 30% so far this year

• After the release of “Claude Code Security,” cybersecurity stocks plummeted

On February 20, at 1 p.m. Eastern Time, Claude announced the launch of “Claude Code Security”—an AI tool that automatically scans for code vulnerabilities. Within two trading days, CrowdStrike’s market cap evaporated by $20 billion.

These reactions are not irrational. The market is pricing in the risk of profit margin compression in real time. When AI can replicate human work, pricing power shifts to buyers. This is the first-order impact, and it’s very real.

But “commodification” does not mean “collapse.” Technology drives growth by lowering costs and increasing accessibility. Personal computers commodified computing power, the internet commodified distribution, cloud computing commodified infrastructure, and AI is commodifying cognition.

The issue isn’t whether some processes will compress profit margins. The question is: will the reduced cognitive costs lead to economic collapse or to large-scale expansion?

Underestimated Dynamic Demand and Incremental Markets

Pessimistic model: AI progress → layoffs and wage declines → reduced consumption → more AI investment → cycle worsens.

This assumes a static economy. History shows that when production costs fall, demand usually expands. The price of computers was 99.9% cheaper than in 1980, but we haven’t just consumed the same amount of computing power—we’ve consumed exponentially more.

If AI reduces costs across industries, even if wages slow down, real purchasing power will rise. The pessimistic scenario only holds if AI replaces labor without expanding demand. The optimistic view is that cheaper productivity will create new markets.

Service Prices Will Plummet

Layoffs make headlines, but a bigger story is the compression of service prices. Healthcare management, legal document drafting, tax filing, compliance review, marketing production, basic programming, customer support, tutoring—these services are expensive because knowledge is scarce.

When the supply of knowledge becomes abundant, the price of knowledge work will naturally fall. The service sector accounts for nearly 80% of US GDP. If operating costs decline, starting small businesses becomes easier; if service prices fall, household participation will increase.

In many ways, AI is like a hidden tax cut. Companies relying on high-cost cognitive labor may face profit margin pressures, but broader economies will benefit from lower service inflation and higher real purchasing power.

From “Ghost GDP” to “Abundant GDP”

Pessimists rely on “ghost GDP,” which reflects output in data but doesn’t benefit households. The optimistic view is what we call “abundant GDP,” where output growth is accompanied by falling living costs.

Abundant GDP doesn’t require nominal income to surge; it requires prices to fall faster than incomes decline. If AI lowers the costs of essential services for many, even if wages slow, households can gain real benefits. So, productivity gains haven’t disappeared—they’re transmitted through lower prices.

Perhaps this explains why over the past 70+ years, productivity growth has consistently outpaced wage growth:

The internet, electricity, mass manufacturing, and antibiotics all provided new ways to expand output and reduce costs, despite their disruptive and volatile nature. But looking back, these changes permanently improved living standards.

A society that spends less time exploring systems and paying for redundant services is, in essence, wealthier.

If prices fall faster than incomes decline, households become materially wealthier. Productivity gains are passed on through lower prices. The internet, electricity, mass production, and antibiotics were initially seen as disruptive, but they permanently raised living standards.

The Rise of Super-Individuals and Autonomous Economies

A major concern is that AI disproportionately impacts white-collar jobs that drive discretionary consumption and housing demand. This is true and a reasonable worry, especially given the already huge wealth gap.

However, AI faces more difficulties in the physical world and in human identity. Skilled trades, hands-on healthcare, advanced manufacturing, and experience-driven industries still have structural demand. In many cases, AI complements these roles rather than replacing them.

More importantly, AI lowers the barriers to entrepreneurship. When someone can automate finance, marketing, customer service, and programming tasks, starting small businesses becomes easier. We are optimistic about small businesses.

In fact, eliminating entry barriers via AI might be the key to bridging the current wealth gap.

The internet eliminated some job categories but also created entirely new ones. AI may follow a similar pattern—shrinking certain white-collar functions while expanding autonomous economic activities in other areas.

SaaS Is Not Dead

AI clearly pressures traditional SaaS business models. procurement negotiations become tougher, and some niche software faces structural headwinds. But SaaS is a delivery mechanism, not the end of value creation.

Next-generation software will be adaptive, agent-driven, results-oriented, and deeply integrated. Winners will no longer be static tool providers but those best able to adapt to change.

Every technological evolution reorganizes architecture; companies pricing static workflows will struggle. Those with data, trust, computing power, energy, and verification capabilities are poised to thrive.

A margin squeeze in one segment doesn’t mean the collapse of the entire digital economy. It signals transformation.

AI Will Reshape Business Models

Pessimists argue that agency-based business models will destroy intermediaries and eliminate fees. To some extent, this is true. When friction decreases, extracting fees becomes harder.

As shown, trading volume of stablecoins has exploded even before AI reached today’s level. Why? Because markets always favor efficiency.

Lower systemic friction also expands trading volume. When price discovery improves and transaction costs fall, more economic activity occurs. This is a bullish trend.

Agents acting on behalf of consumers may compress profit margins of platform-based businesses built on user habits. But they can also increase overall demand by lowering search costs and boosting efficiency.

Productivity Is the Key Variable

The ultimate determinant of an optimistic outcome is productivity. If AI can sustain productivity growth in healthcare, government administration, logistics, manufacturing, and energy optimization, the result will be extreme abundance and a significant increase in resource access for everyone.

Even just a 1-2% incremental productivity increase sustained over ten years can produce astonishing compound effects.

The current macroeconomic shifts driven by AI already harbor some of the best investment opportunities in history. We have invested countless hours and remain committed to staying at the forefront. If you’re interested in our advanced analysis reports and our investment strategies during this disruptive period, visit thekobeissiletter.com for more research.

As shown, productivity has begun accelerating due to AI in Q3 2025:

Pessimists believe that productivity gains solely benefit those building AI models, without broader benefits. Optimists argue that price compression and new markets will more widely distribute these gains.

Prosperous Productivity Will Reduce Conflicts

One of the least discussed impacts of AI-driven abundance is on geopolitics.

Throughout most of modern history, wars erupted over scarce resources: energy, food, trade routes, industrial capacity, labor, and technology. When resources are limited and growth feels like a zero-sum game, nations compete. But abundance changes everything.

If AI substantially lowers the costs of energy, manufacturing design, logistics, and services, the global “cake” will grow. When productivity rises and marginal costs fall, economic growth will no longer depend so heavily on extracting advantages from others. This could end wars and usher in the most peaceful era in human history.

The same applies to economic warfare, like the ongoing year-long trade war.

In a world where domestic industries can’t compete on costs, tariffs serve as protection. But if AI drastically reduces production costs everywhere, why do we need tariffs? In a highly abundant environment, protectionism becomes economically inefficient.

History shows that periods of technological acceleration tend to reduce global conflicts over the long term. Post-WWII industrial expansion decreased the motivation for major powers to confront each other directly.

What If the World Doesn’t End?

AI amplifies outcomes. If institutions fail to adapt, it will magnify vulnerabilities; if productivity growth surpasses disruptive destruction, it will amplify prosperity.

The crash triggered by Anthropic signals that workflows are being re-priced and cognitive labor is becoming cheaper—a clear sign of transformation.

But transformation isn’t collapse, because every major technological revolution initially appears disruptive.

The most underestimated macro outcome today isn’t dystopian but a comprehensive prosperity following a leap in productivity.

AI may compress land rents, reduce friction, and reorganize labor markets, but it could also bring the largest-scale real productivity expansion in modern history.

The difference between a “global intelligence crisis” and a “global intelligence prosperity” isn’t ability but adaptation.

And the world always finds ways to adapt.

Finally, those who can objectively navigate this disruptive period and follow systematic processes are entering the best trading environment in history.

Objectivity and systematic approaches are why we outperform benchmarks. Since 2020, our investment strategy has returned nearly five times the S&P 500.