← What Next: TBD | Tech, power, and the future
What Next: TBD | Tech, power, and the future
The A.I. Disruption Is Here
00:24:54
A.I. is disrupting sectors once thought insulated from it, upending the markets.
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- [00:00]
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Shayna Roth
If you've been watching the stock market the past couple of days, you may have seen a company called Algorithm holdings being talked about a lot.
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Emily Peck
I mean, no one had heard of this company before last week.
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Shayna Roth
Emily Peck is a national correspondent at Axios and one of the hosts of the Slate Money podcast.
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Emily Peck
This is a former karaoke company with a stock market value of just $6 million, and it decided karaoke wasn't working for the company. So it changed and became a logistics firm. And last week it fell victim to something called the AI Scare trade. Duh duh duh.
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Shayna Roth
The AI scare trade is exactly what it sounds like. Earlier this month, Algorithm holdings told clients that with the help of AI, they were doing big business without hiring additional workers. This one little announcement sent the trucking and logistics industries into a tailspin, because right now the stock market is very hanky when it comes to AI.
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Emily Peck
This started a few weeks ago with software, legal software, where Anthropic, an AI firm announced a new legal plugin and the stock market decided that meant all the legal software companies were in trouble, on the edge of obsoletion and their stocks went down. And then we saw this play out across other industries. There was commercial real estate, other software firms. Yeah, those are just some as the sort of like the trend sort of ripples through the markets. I should say for the record, Shayna, that the algorithm's stock rose on the news.
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Shayna Roth
Clearly when it comes to moves by companies related to artificial intelligence, the markets are having issues.
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More than a trillion dollars wiped out from big tech market caps in just the last week as those four large hyperscalers announced they expect to spend more than $600 billion in capex this year.
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Emily Peck
Very much feels like the market is just taking a look around at any possible sector that could be disrupted by AI selling first, asking questions later.
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Blue Apron Ad Voice
Right now that disruption obviously has become destruction, I mean absolute destruction for software as a service companies.
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Emily Peck
It's just this really weird, touchy moment for markets where any kind of news AI related is going to set off this scare trade. That's what's been going on for the past few weeks. It seems to possibly have settled down a bit now, but the scare trade has sort of drained some value out of the market. A lot of stocks are down software indices that truck companies in the software sector, their stocks are down. No one really knows, Shayna, why stocks go up and down. That's the honest truth, no one will tell you. But broadly speaking, trucking stocks went down because investors were scared that AI was going to really radically disrupt this industry as it appears to be poised to disrupt so many industries. Even outside of tech.
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Shayna Roth
AI companies have positioned themselves as being the harbingers of a new era of prosperity and productivity. And until very recently, the markets were more than happy to hear it. But now an AI doom loop is rocking the S and P and the nasdaq. So what changed? Well, part of it was the release of Claude code, an AI product that lets you type in whatever you want to make and poof, out pops the code. That's led to something called vibe coding, where suddenly it's a lot easier for anyone to code almost anything.
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Emily Peck
Everyone started quote unquote, vibe coding and it was almost like a light bulb went off collectively. You know, software engineers started saying oh my gosh, like I'm not necessary anymore. And then there was sort of like a ripple out effect where people said oh My gosh, if anyone can write software, we don't need software companies anymore. And oh my gosh, if we don't need as many software coders anymore, we don't need to buy as much software for them anymore. We don't need licenses for their seats anymore. And so there's sort of like a repricing, reshifting, kind of recalibrating and forecasting what the software industry is going to look like and what so many other industries are going to look like. Because we're in the middle of this really huge disruption and tech revolution.
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Shayna Roth
Today on the show, the AI disruption is here. Is anybody ready? I'm Shana Roth filling in for Lizzie o'. Leary. You're listening to what Next tbd, a show about technology, power and how the future will be determined. Stick around.
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Emily Peck
With the times.
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Emily Peck
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Shayna Roth
Emily, how would you describe the stock market in the past couple of months, what's been going on?
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Emily Peck
Great question. The stock market for the past few years has been really spurred higher and higher and higher by artificial intelligence, by AI. Every time a big tech company like your Amazon, like your Meta, said in an earnings report, you know, they put these out every quarter. Every time they said, we're spending more money on AI infrastructure to build data centers, et cetera, the stock market was like, yes, let's go. And their stock prices went up. More recently, these companies came out with earnings. Microsoft and Amazon in particular, they came out in their earnings report, they said, we're spending more money on AI. And the stock market said, ooh, really? These companies are now spending billions and hundreds of billions of dollars on AI. And the stock market is sort of thinking. Not that the stock market thinks, but the market isn't liking it anymore. Now it's gone from excitement about A to anxiety about AI, sort of catching up with the rest of us worker B types who have been told for the past year or two that our jobs are about to become obsolete. And we've all been freaking out over it. You see it in polls and surveys. Well, now the stock market has caught up, so it hasn't really fallen very dramatically. You'd say it's sort of like bouncing around at the high level it's been at. But you see the anxiety in individual stocks, like. Like Amazon's, which is down, like Microsoft's, which is down. Like all these software companies now that are getting hit with AI anxiety, like a random karaoke company, it's all been sort of weaving its way through.
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Shayna Roth
Where does the anxiety come from? Is it just a, like, FOMO situation where they're all just like, oh, my God, I can't miss out on this AI thing? Or is there something deeper to it?
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Emily Peck
I think. I think it's actually pretty deep. I mean, stocks go up and down. It's not. Who even knows. But the anxiety, I think, is real. And I think it was really spurred by that, that vibe coding moment. And we see now, like, every week, every few days, there's someone in Silicon Valley, some tech person coming out and saying, like, I don't have a job anymore. This one tweet in particular came out and was getting passed around, had like a million views. The writer basically said, there's no need for people to write software anymore. And now we're facing a total crisis, and everyone's jobs, everyone's jobs will become obsolete because of AI tapping into just this broader anxiety. Really. Society Wide that has now taken hold in the stock market even. But you know, when stock prices fall, that's a sale. Shayna, just think about it that way.
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Shayna Roth
I love a good sale. This all feels kind of reminiscent of previous times when a new technology just went up and in the markets I think I'm thinking of, and I'm sure some other people are probably thinking of the dot com bubble in the early aughts. Is it fair to look at that as sort of precedent for what's happening now with AI?
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Emily Peck
Yeah, I mean I think it's precedent. I was, I'm old enough to remember when that all played out and at first it was, it was quite similar. Although I'd say the timeline these days is much more compressed. Things happen faster because of, because of the Internet. But back then it was the same thing. There was so much excitement around Internet companies and stocks like Amazon. Back then there was famously a company called Pets.com, had like a sock puppet in its commercials. There were super bowl ads for pets.com and everyone was like buy your, buy pet food on the Internet. That's, that's a bubble, you know. But nevertheless these stocks went higher and higher and everyone seemed to be getting into it, putting their money into the stock market. It was sort of like the dawn of day trading, individuals having access to the stock market, that kind of thing. And then it all, it all blew up. We had the dot com bubble famously burst in 2001. We had the US went into a mild recession, but we rose from the ashes. Things only got better after that. It was a slump. But eventually people figured it out. New companies were born, new ways of working were created. It does sort of feel similar now. I'm not saying we're near any kind of market crash or anything like that. Like I said, the market's at still hovering around these highs. But it does have that feeling now that we're, we're on the precipice of something really big and it's starting to move. No one really knows who is going to win and who's going to lose. So it's hard to navigate markets at that time when you just don't know what company is the one that's going to be the Amazon of the era or which is going to be the pets.com right.
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Shayna Roth
And we've seen the stock market get jittery on AI before only to bounce back a day or so later. And again we're seeing that play out here too. But at the same time, I wonder if this feels different from the other times. Like investors are maybe getting fed up with AI.
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Emily Peck
I don't know if fed fed up with AI, but they're getting a little more antsy about the money that some of these big tech companies are spending on AI infrastructure. Like I said before, they're spending hundreds of billions of dollars. The projections are truly eye popping. These are companies, these tech companies like your Meta, your Microsoft, that traditionally they make a lot of cash, they have a lot of what's called free cash flow. They're like low, they're not very capital intensive. Like they don't need a lot of real world things to make a lot of money. If you're a Microsoft, you make a software and then you sell it to millions of people, do you know what I mean? And then they all subscribe to your software and you're just collecting the money, thank you very much. You don't have to build a factory to do it. It's, it's like a great business. And in a lot of these companies they're just these great businesses that just make so much cash, right? But now they're spending real money on real stuff like power hungry data centers and things like that. And investors are like, hang on, these businesses are changing wholesale. They're going from these sort of capital, light cash flowing things to something we don't understand as well, you know, we just don't understand as well and like in the long run might not throw off as much cash anymore. And that makes analysts and investors sort of like reassess the way they value these companies and stocks.
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Shayna Roth
When we come back, AI breaks containment from the tech sector.
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Shayna Roth
earlier we talked about this logistics company. Is every industry at risk of being impacted by AI or do you think there's certain industries that are more susceptible than others? I feel like, I don't know. I'm trying to think of a, of a job that couldn't potentially get replaced by AI and I am struggling.
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Emily Peck
What I know from having lived through the dot com situation is at first everyone was like, whatever, this is funny. Selling cat food, cat food on the Internet is so funny. Oh, websites are funny, they're fun. And then it was like, oh, everyone needs a website, but we don't know why. And like fast forward to today and it's like, if you don't have a website, do you even exist if you're a company? Everyone had to adjust. The whole economy had to adjust. Politics, like everything adjusted to the Internet. I think long term, the way people are talking, it's probable that everyone once again will have to adjust to AI and they will be exposed to AI in like at different levels. Not to say that everyone's going to be replaced by the AI people weren't replaced by. I wasn't replaced by the Internet. I made it through Shayna. God, God willing, I'll make it through this. Yeah, but, but like everyone's jobs will have to be recalibrated to AI. But of course, like doctors are, I would think aren't totally going away. You know, politicians probably not going away. You know, we'll have to see what happens, I guess. Yeah.
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Shayna Roth
In the wake of the sell off, a lot of people were speculating that software firms were going to be made obsolete. And yet some software companies have already started to bounce back. Figma's stock jumped off the news that AI was accelerating the company's growth.
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Are there certain factors that are making
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certain companies more susceptible than others? Or is a company like Figma sort of the outlier in this situation?
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Emily Peck
I think at first the stock market, the scare trade was pretty indiscriminate and all the company stocks, pretty much all software companies saw their stocks fall. I think now what analysts are saying and what software expert types are saying is like some companies are going to be able to adjust and some companies aren't. So it's sort of like a matter of figuring out who is who. And then there's another contingent of software engineer expert types that are like, just because everyone can make software theoretically in the future doesn't mean you're not going to need sort of experts to make everything work properly. Like the Internet made everyone a writer. Shayna. But I think we can agree that not everyone is a writer.
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Shayna Roth
Not everyone's a good writer. Everyone can write, but not everybody's a good writer.
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Emily Peck
Exactly.
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Shayna Roth
A lot of this concern seems to be based on whether or not investments in AI will actually pay off. Obviously everybody wants to make their money. Are there any industries where AI seems to be delivering on its promise?
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Emily Peck
I mean it's definitely delivering for the startups that are now valued at these eye popping multi hundred billion dollar valuations like your OpenAI and your Anthropic. It's benefiting them. You see in customer service, I'm hearing from companies that are saying like, we're not hiring customer service people anymore. We're continuing to reduce use AI to replace those people. I would add that customer service and customer support is an industry that's been slowly like overtaken by automation for years and years. So this is like the next step of that. You're hearing more about freelancers being replaced by AI right now. It's sort of at a moment of like the first wave with the Internet was sort of the architecture, the skeleton, the data centers, the, the infrastructure of AI companies that are involved with that, like your Nvidia's and the companies making data centers, your oracles, whatever, they are benefiting now from AI in real ways. But the question is what will the infrastructure be used for?
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Shayna Roth
Right along with this sort of wholesale market uncertainty, there has been unease in the job market. Are we able to attribute any of that to what is happening with this AI uncertainty?
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Emily Peck
I mean I think about this all the time. So the job market is bad right now for a few reasons. The companies over hired during the pandemic so they don't need to hire as much anymore. The Federal Reserve raised interest rates that made it harder, more expensive to borrow. It kind of slowed the economy and so it slowed hiring also. So that that's all happening. But hanging over all of this is you have companies, CEOs, podcasts like this articles daily talking about AI is coming for your job. We had a period of time, it's died down a little bit now because I think the CEOs realize that no one likes when they talk about it, but there was a period of time when CEOs were saying every day, like, yeah, we're not going to need to hire as many people because of AI or because of AI, we're going to cut this or that or this or that. And there's a palpable anxiety when you talk to anyone, particularly white collar professionals right now about AI, like, anyone. I actually am surprised by it sometimes because in journalism, we're always paranoid that our jobs are becoming obsolete. You know, our industry has been shrinking and shrinking, but like so many other white collar professions, you think they have it on easy street. But now these days, I talk to lawyers, I talk to economists, whoever. They're all feeling it, the concern, the worry, the anxiety.
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Shayna Roth
One of the areas that I think about is labor. Since at least 2010, you know, for the past 16 years, there's been no more elite worker than a tech worker. You know, they've been paid the most, most in demand. Everybody's like, oh my gosh, if you're looking for a job, you should get into the tech world. And that seems to have really shifted. This latest moment has crushed those jobs. And now these seem to be the most insecure positions. So if you're a software engineer right now, or you're maybe trending in that direction for your career path, how worried are you?
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Emily Peck
I think there's a lot of worry, a lot of fear that those jobs just simply will not. Will not exist anymore. And I was saying to your producer, to Evan, come on, we know him. I was saying the other day when we were talking about this topic, I said, you know, I remember getting laid off in 2021. And I announced it on Twitter back when Twitter existed. And there are all these trolls in the comments saying, learn to code, learn to code, learn to code. That's like the classic comeback. Well, it's not a good comeback anymore. Learning to code is so over. It's so 2021, Shaina.
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Shayna Roth
Really.
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Emily Peck
And yes, and I think there was already a sense in the tech world and those cushy Silicon Valley jobs that the benefits weren't as good anymore for the reasons I said before, the interest rates part and the labor market slowdown and just as, you know, return to office, there was, you know, fewer perks. Da, da da, da da. This is just like the nail in the coffin, I think.
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Shayna Roth
Yeah, I mean, it really doesn't help that tech numpties like me could get into a program and be like, I would like a game or an app that does xyz and then all of a sudden, boop, boop, boop, there it is.
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Emily Peck
At my company Axios, where I work for my day job, they, they cut the staff that, that works on this stuff. And you know, we recently had a meeting where they talked about we get things done in 15 minutes. That used to take days, if not longer. Like, we've reduced our backlog. There is no backlog anymore. Like, yeah, the, the demand for software engineers has radically changed.
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Shayna Roth
I can't help but feel like this all might be a real leopard eating its own face moment where you might see a software company that has been integrating AI into its products to try and piggyback off the AI boom, then get crushed by advancements in AI. Do you think that this might cause a shift in the way that businesses or people use AI? I mean, are people going to become more skeptical about integrating it into their business? Or is this one of those things where, look, the genie's out of the lamp, the cat's out of the bag, we just gotta go forward.
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Emily Peck
The cat's out of the lamp, out of the genie. I think, I don't know, I can't predict the future. I think there's so much. Everyone now wants to be on the right side of history and they want to do whatever the AI thing is. Just like back in the day they wanted to have their website even though they didn't know what the heck to even put on the website or have anyone to put anything on the website, et cetera, et cetera. I feel like, exactly. You said, like the genie is out and hanging around and pushing everyone to append their company name with the, with the letters AI and pray that the stock market rewards them.
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Shayna Roth
There seems to also be this number goes up problem here where whether or not AI is actually helping these companies. CEOs are almost required to keep investing in AI because it means more money for shareholders. You mentioned how CEOs in the past were constantly talking about like, yes, we are bringing in more AI, but it's almost a double edged sword. Is there a way to break that cycle?
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Emily Peck
I mean, CEOs going to CEO, they're going to, they're going to talk about whatever they, they're going to talk about what they think investors in the stock market want to hear. There is a disconnect, I think, between what the leaders of companies do and say and want and what the people who work in the companies do and say and want. Right. Like CEOs leaders of companies, they don't like having big expensive workforces filled with like diva software engineers who require three free meals a day. Like they would prefer. Typically, when, you know, when a company announces layoffs, the stock of the company goes up. That's been true for Meta. It's announced layoffs a few times over the past few years and the stock goes up because investors like it when there's fewer workers at a company and it can make more money anyway, that's great news. So I think that the interests I'm not saying CEOs are cynical and they don't respect their workers and all of this, but there is this disconnect in interests. Doing things to please investors in the market, doing things to please your workforce are not always the same things.
- [29:04]
Shayna Roth
Emily Peck, I always adore getting the chance to chat with you. Thank you so much for coming on the show.
- [29:09]
Emily Peck
Thanks, Shayna.
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Shayna Roth
Emily Peck is a national correspondent for Axios and the host of the Slate Money podcast. All right, that is it for our show today. What Next TBD is produced by Evan Campbell and Patrick Fort. Our show is edited by Paige Osborne,
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who is the senior supervising producer for
- [29:29]
what Next and what Next tbd. Mia Lobel is the executive producer at Slate. TBD is part of the larger what Next family. And I'm Shayna Roth filling in for Lizzie o'. Leary. Thanks for listening.
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