Why AI Won’t Devour the Stock Market – And Why the U.S. Economy May Be on the Verge of a Boom
The opening days of February delivered exactly what investors dread and secretly crave at the same time: drama. A fresh wave of excitement around artificial intelligence sent shockwaves through the market, wiping out hundreds of billions of dollars in value and setting off a fierce debate about whether AI will destroy existing business models or ignite a new economic expansion.
The latest tremor came from Anthropic, one of the leading players in the AI space. Demonstrations of its Claude chatbot — with capabilities that looked less like incremental improvement and more like a step change — shook confidence across the software sector. Suddenly, long-established companies faced an uncomfortable question: what if their products become obsolete faster than anyone expected?
That fear translated into numbers very quickly. A broad selloff hit software and tech stocks, with investors scrambling to reassess how sustainable current valuations really are in a world where AI tools might replicate or surpass many of the functions people are paying for today. For a moment, the market looked less like a place for rational pricing and more like a referendum on who will survive the AI era.
Marta Norton, chief investment strategist at Empower Investments, drew a sharp analogy that stuck with many observers. The situation, she said, reminded her of the moment Apple’s iPhone upended the dominance of BlackBerry. Back then, BlackBerry didn’t immediately vanish; it limped along as a company. But as a stock, it was effectively destroyed — down about 98% from its 2008 levels. For investors, “technically still alive” is little consolation.
That historical memory is exactly what’s haunting today’s software shareholders. If AI becomes the new iPhone-like platform shift, which current giants will play the role of BlackBerry? The market, always forward-looking and often melodramatic, reacted as if many existing players are already priced for disruption — or worse.
Bloomberg estimated that around $1 trillion in market value evaporated in roughly a week. That kind of number tends to dominate headlines and stir anxiety. When such a vast sum disappears on paper in days, it’s easy to jump to apocalyptic conclusions: AI is about to eat software, software is a huge part of the market, and therefore the entire economy must be in trouble.
Yet some of Wall Street’s most closely followed analysts are pushing back on that narrative. Torsten Slok, chief economist at Apollo Global Management, has been arguing that the bigger picture looks far more optimistic than investors’ immediate reactions suggest. In his regular commentary, he urged market participants to distinguish between sector-specific turbulence and the health of the broader U.S. economy.
Slok’s core point is simple but counterintuitive to those watching daily price moves: turbulence in tech — even extreme turbulence — does not necessarily equal economic weakness. In his view, worries about AI “eating” the stock market are overblown, while the foundation for a strong expansion is quietly strengthening underneath the surface.
From his perspective, what’s happening now is partly a classic case of markets overreacting to uncertainty. Whenever a transformative technology emerges, investors find themselves trying to discount the future all at once. That usually leads to wild revaluations: some companies get wildly overhyped, others are punished too severely, and volatility spikes as narratives change day by day.
Critically, though, that volatility is largely confined to specific sectors. The software industry and adjacent areas may experience huge winners and losers, but that doesn’t automatically transmit into a nationwide downturn. Many other parts of the economy — manufacturing, consumer services, energy, transportation, healthcare — are influenced by AI in very different, often more positive ways.
Instead of seeing AI as an unstoppable destroyer, Slok and many other economists frame it as a classic productivity shock. Historically, when new technologies automate routine tasks, they tend to do three things over time: reduce costs, improve efficiency, and enable entirely new products and services. That mix has usually led to higher output, rising corporate profits in aggregate, and, ultimately, stronger economic growth.
That’s the backbone of the “about to take off” thesis for the U.S. economy. If AI tools scale across industries — not just in Silicon Valley, but in logistics, design, medicine, education, and beyond — the result could be a multi-year boost to productivity growth. And productivity growth is one of the most important drivers of long-term living standards and corporate earnings.
Right now, the disconnect is psychological. Investors see familiar companies being threatened and respond with fear. Economists see the potential for lower costs, faster innovation, and a broader expansion of economic capacity. Those two views are not actually incompatible — they’re simply looking at different time horizons.
In the near term, there will almost certainly be casualties. Some business models built on tasks that AI can do cheaply and quickly are at real risk. Software firms that charge high prices for features that can be replicated by general-purpose AI tools will have to reinvent themselves or watch their margins erode. These are painful adjustments, especially for shareholders and employees in the directly affected firms.
However, the market’s obsession with disruption can obscure the other side of the equation: adoption. Every company that adopts AI in a smart way gains a potential competitive edge. Customer support centers can handle more inquiries with fewer agents. Legal and accounting teams can automate rote work and spend more time on strategy. Engineers can prototype, test, and iterate faster. For the economy as a whole, those incremental gains add up.
Previous technological revolutions followed a similar pattern. When personal computers appeared, many feared they would kill certain jobs outright. And some roles did disappear. But new roles — from software developer to IT manager to digital marketer — exploded in number. The same happened with the internet and smartphones. The story was never just about destruction; it was about creative destruction, where old models fade but new opportunities emerge even faster.
What’s different with AI is the perceived speed and breadth of impact. Tools like Claude and other advanced models can be applied across white-collar professions in a way that feels more immediate and personal than hardware innovations of the past. That emotional proximity helps explain the intensity of current market swings: investors aren’t just watching an industrial robot replace factory work — they’re watching code that might write code, or software that might draft reports.
Yet, from a macroeconomic standpoint, the fundamentals still matter more than the fear. Employment remains resilient, consumer balance sheets are far healthier than after previous major shocks, and corporate investment in technology and automation is robust. Those are not the hallmarks of an economy on the verge of collapse; they’re signs of one preparing for the next leg of growth.
Even in the stock market itself, AI-induced volatility doesn’t necessarily mean systemic risk. Sector rotations — where money flows out of one group of stocks and into another — are a normal part of market dynamics. If some legacy software names lose value while AI leaders, chipmakers, or beneficiaries of productivity enhancements gain, the index-level impact can be far less dramatic than the headlines suggest.
For long-term investors, the more useful question is not “Will AI destroy the market?” but “Which parts of the market will AI reshape, and how quickly?” That frame pushes attention toward fundamentals: which companies are investing in AI capabilities, which are building defensible moats around their data and infrastructure, and which are complacently hoping the storm will pass.
On the policy side, a productivity boom powered by AI could also give the U.S. more room to navigate difficult trade-offs. Faster growth can make high levels of public debt more manageable relative to GDP, ease the fiscal strain of an aging population, and create new tax revenues without raising rates. It also gives central banks more flexibility: if trend growth improves, interest rates don’t need to be as low to sustain expansion.
None of this means the road will be smooth. Transition periods are rarely comfortable. Some regions and sectors will bear more of the adjustment cost than others. Regulators will wrestle with issues of data privacy, bias, and market concentration. Workers will need retraining and support as certain roles are transformed or eliminated. Those challenges are real, and ignoring them would be naive.
But conflating those challenges with an inevitable economic downturn is a mistake. If anything, the scale of AI-related investment, hiring in advanced tech fields, and retooling of existing businesses points toward a multi-year cycle of capital spending. That wave of investment — in data centers, energy infrastructure, connectivity, and training — is itself a powerful driver of growth.
The stock market’s role in this story is as a highly imperfect, highly emotional prediction machine. In weeks like the one that wiped out roughly $1 trillion in value, the machine is screaming that it doesn’t yet know how to price the future. Prices overshoot both on optimism and on fear. But over time, as winners and losers become clearer, valuations tend to settle into a more rational pattern.
For now, the takeaway is starkly different depending on whether you focus on the screen in front of you or the trajectory of the broader economy. On the screen: violent moves, sudden selloffs in software, and intense speculation about AI bubbles. In the bigger picture: a U.S. economy that many experts believe is laying the groundwork for faster growth, powered in part by the very technology currently unnerving investors.
In that context, worries about AI “eating” the stock market miss the larger point. AI is far more likely to reorder the market than to erase it, picking new winners while sidelining some incumbents. And rather than dragging the U.S. economy down, the spread of AI-powered tools could be one of the main reasons it’s poised, in the words of leading analysts, to finally take off.