Fears over artificial intelligence's disruptive economic impact triggered a significant market sell-off this week, with software and cybersecurity stocks bearing the brunt of the losses. The downturn was ignited by a speculative report from Citrini Research and a new AI tool from Anthropic, raising concerns about AI's effect on white-collar jobs and corporate profits.
The sell-off began in earnest after the weekend release of a report from Citrini Research, which presented a hypothetical scenario set in June 2028. The report warned that AI automation could lead to significant white-collar job losses, weaker consumer demand, and rising credit stress, despite potentially higher corporate profits. Alap Shah, Chief Investment Officer at Lotus Technology Management and co-author of the report, elaborated in a Bloomberg TV interview, stating that "the smarter AI gets, the more jobs it can replace." He estimates AI could cut white-collar employment by 5% over the next 18 months.
The market reaction was swift and severe. The iShares Expanded Tech-Software Sector ETF (IGV) tumbled 4.66% on Monday, bringing its total decline from its September peak to roughly 35%. For February alone, the ETF is down 15%, on pace for its worst monthly performance since 2008. Specific companies were hit hard: International Business Machines Corp. (IBM) saw its worst single-day drop in 25 years, while cybersecurity firm CrowdStrike lost $20 billion in market value over two trading sessions following a separate AI announcement.
That announcement came from AI firm Anthropic, which launched "Claude Code Security," a tool that scans codebases for vulnerabilities. This development spooked investors, who fear such AI tools could disrupt the cybersecurity and broader software industry. Holger Zschaepitz of Die Welt noted, "This indicates that there is nowhere to hide when it comes to software stocks."
The turmoil has direct implications for the cryptocurrency market, particularly Bitcoin (BTC). Analysts at Grayscale and others, including commentator Jim Bianco, have highlighted that Bitcoin's price action has closely mirrored that of U.S. software stocks during this sell-off. This suggests Bitcoin is currently trading more like a high-beta tech stock than an uncorrelated hedge. Consequently, prolonged weakness in software equities could keep Bitcoin under pressure due to tighter financial conditions and systematic deleveraging.
However, a potential divergence exists. Shah, the report co-author, suggested governments consider policies like an "AI tax" on incremental gains to cushion job loss effects. If such structural economic disruptions or policy responses lead to currency debasement or aggressive stimulus, investors may begin to view Bitcoin as a monetary hedge, potentially weakening its correlation with tech stocks. For now, the market is bracing for continued volatility as it grapples with AI's uncertain economic fallout.
