Mass Unemployment Caused by AI Could Crash the Stock Market

Carson Block, founder of investment firm Muddy Waters Capital, believes that the rapid advancement of artificial intelligence could trigger major changes in the U.S. labor market. According to his estimates, around 15% of knowledge workers could lose their jobs within the next few years.

The investor made these remarks during an episode of the Merryn Talks Money podcast. Block believes the biggest impact will be felt in professions centered around information processing, document review, and analytical work. This includes lawyers, finance professionals, IT specialists, and other workers employed in the so-called knowledge economy.

According to Block, around 100 million people in the United States work in these sectors. If his forecast proves accurate, roughly 15 million jobs could disappear over the next few years.

He pointed to the legal industry as one example. Modern AI systems, including Anthropic’s Claude and other chatbots, are already capable of analyzing vast amounts of documents and retrieving relevant information in a fraction of the time previously required. As a result, thousands of billable hours that were once performed by humans can now be completed by AI.

In Block’s view, this trend is only beginning.

“Those jobs are going away, and the number of chairs available for people will continue to shrink.”

He argues that the consequences could extend far beyond the labor market itself. People who lose their jobs may stop investing regularly and begin drawing down their savings to cover everyday expenses, including funds from retirement accounts.

If that happens, the flow of money into the stock market could reverse. Instead of continuing to see net inflows into the S&P 500, markets could face significant capital outflows, potentially putting downward pressure on stock prices.

Block also highlighted the growing dominance of passive investing. In his opinion, this has made financial markets more fragile and potentially more vulnerable to sharp downturns.

Similar concerns have previously been raised by investor Michael Burry, who became famous for predicting the 2008 financial crisis. Last year, Burry drew attention with major bearish positions against Nvidia and Palantir, as well as a series of cryptic social media posts suggesting that U.S. markets may be more vulnerable than many investors realize.

Despite his gloomy outlook, Block does not believe the future will be entirely negative. In fact, he expects that most people could eventually enjoy comfortable lives in a highly automated economy.

“The good news is that I think most people will live pretty comfortable lives.”

According to his vision, many middle-class workers may only need to work two or three days per week while still earning enough to travel and maintain a comfortable lifestyle.

At the same time, he predicts the emergence of a separate group of people who may not need to work at all and instead rely on a universal basic income. Block referred to this group as a “lower class.”

Discussions surrounding universal basic income have become increasingly common among AI advocates in recent years. Supporters argue that unconditional payments could help prevent social instability if automation eliminates large numbers of jobs.

A similar view has been expressed by Elon Musk, who has suggested that government-funded income support may become necessary to offset AI-driven job losses.

Meanwhile, the actual benefits of today’s AI systems remain a subject of debate. Despite repeated promises of a productivity revolution, surveys have yet to show a significant improvement in business performance or profitability.

Some studies have even found that AI tools can increase workloads for employees in certain situations. As a result, the dramatic productivity gains promised by technology companies have yet to materialize on a large scale.

For those interested in hearing Block’s full remarks, the complete interview is available on YouTube.