AI Doomsday Scenario Triggers Market Turmoil as Dow Drops Over 800 Points
Wall Street experienced a sharp decline on Tuesday, with the Dow Jones Industrial Average opening down more than 800 points, driven by escalating fears over artificial intelligence's potential to disrupt the US economy. This market jitter follows the viral circulation of a speculative report from Citrini Research, a little-known firm that provides insights on transformative megatrends, which has unnerved investors with its bleak portrayal of a near-future dominated by autonomous AI systems.
Citrini's Speculative Scenario: A Feedback Loop with No Brake
Citrini Research's Substack post, described as a "scenario, not a prediction," envisions a timeline from the present to June 2028, where AI agents upend the entire US economy. The scenario predicts unemployment soaring above 10%, accompanied by an Occupy Silicon Valley movement protesting outside offices of AI giants like OpenAI and Anthropic. It details a series of events triggered by widespread AI adoption, leading to a downward spiral affecting software companies, private credit, and mortgages.
Despite its speculative nature, the report has had tangible market impacts. On Monday, the S&P 500 fell more than 1%, with its software component hitting its lowest level since April. Companies specifically named in the report, such as Uber, American Express, Mastercard, and DoorDash, saw losses between 4% and 6%. Neil Wilson, an analyst at Saxo Capital Markets, commented, "It's real doomsday porn stuff, which is always lapped up by readers and market commentators and the press. I don't think it's necessarily going to play out as they see it, but it's a bit of a wake-up call that the economy already no longer resembles the one just a few years ago."
Key Elements of the AI Disruption Scenario
1. AI Agents Remove Economic Friction: The scenario begins with AI agents, like Anthropic's Claude Code and OpenAI's Codex, undergoing a capability jump. These agents threaten software-as-a-service companies such as Monday.com, Zapier, and Asana by offering cheaper alternatives for in-house tasks like database management and workflow organization. This forces businesses like Oracle into a price war. Additionally, AI agents sideline middlemen in industries like travel and real estate, while fragmenting markets for services like food delivery and ride-sharing. Payment providers like Visa and Mastercard are gutted as AI agents shift transactions to cheaper cryptocurrencies.
2. Mass White-Collar Unemployment: Citrini argues that AI, as a general intelligence, displaces workers without creating new jobs, leading to a surge in gig-economy employment. This suppresses wages and reduces consumer spending, creating a feedback loop where companies invest more in AI instead of human workers. The report notes that the top 10% of US workers, who account for 50% of consumer spending, could see their wallets snap shut, exacerbating economic strain.
3. Ripples into Broader Economy: The scenario predicts job losses and software company failures triggering defaults in private credit and a mortgage crisis. For example, loans based on stable revenue assumptions for companies like Zendesk could fail, leading to historic defaults. Regulators might downgrade this debt, contributing to a crash in 2027. Simultaneously, white-collar workers unable to repay mortgages due to job losses could spark a housing crisis.
4. Downward Spirals and Policy Challenges: Citrini describes two reinforcing spirals: companies laying off workers weakens demand, leading to more AI investment and layoffs, while private credit turmoil and mortgage concerns tighten markets and shake consumer confidence. The report asserts that traditional financial policy tools are ineffective because the crisis stems from AI investment making human intelligence less valuable, not from tight financial conditions.
5. Occupy Silicon Valley and Ghost GDP: The scenario culminates in a late 2027 crash wiping out 57% of the S&P 500, driven by mortgage market failures. Governments struggle as tax revenues decline due to reduced human labor, while AI companies thrive, creating "Ghost GDP"—output that appears in national accounts but doesn't circulate in the real economy. Social unrest leads to protests blockading AI firm offices.
Market Reactions and Expert Commentary
The impact of Citrini's scenario has startled commentators, even among experts who doubt AI's current capability to enact such changes. Stephen Innes, a managing partner at SPI Asset Management, observed, "We have watched this market absorb wars, sticky inflation, banking tremors and tariff theatrics with a shrug, yet a widely circulated Substack thought piece is enough to knock it sideways." This highlights how speculative narratives can influence market behavior, adding to existing anxieties about AI's economic implications.
Citrini concludes with a cautionary note: "This is the first time in history the most productive asset in the economy has produced fewer, not more, jobs. Nobody's framework fits, because none were designed for a world where the scarce input became abundant. So we have to make new frameworks. Whether we build them in time is the only question that matters." As markets continue to react, this report underscores the urgent need for new economic models to address the transformative potential of AI.
