Americans are growing anxious about what artificial intelligence will mean for their future. According to a recent Quinnipiac poll, 8 in 10 Americans report being concerned about AI, compared to 3 in 10 reporting being excited. More than half believe it is likely to do more harm than good to their daily lives. Seven in 10 people think there will be fewer jobs available.
They may be skeptical, but whether they want it or not, they are about to have more AI shoved down their throats and into their pension plans and investment portfolios. Their futures are more closely tied than ever to the frenzied and risky multibillion-dollar rush by technology industry moguls to develop machines that can mimic human thought processes and take over cognitive tasks.
First is this week’s massive $75 billion initial public offering (IPO) for Elon Musk’s SpaceX, the largest in history, and at $135 a share, the company would be worth a hefty $1.77 trillion, ranking it among the top 10 companies in the world by market capitalization. The company has been making most of its revenue lately from selling internet access, much of which it needs to fund Mr. Musk’s vast AI ambitions, including launching data centers into orbit.
This proposal is only the first in a series. Both Anthropic and OpenAI have already filed papers for their IPOs later this year, which would bring two multitrillion-dollar artificial intelligence giants onto major U.S. stock indexes.
Even investors who don’t intend to buy their own stocks, who will eventually end up owning a large amount of the stock, either in a 401(k) retirement plan or in a market index fund (which is built to reflect the market as a whole and is considered a safer investment for non-professional investors), will be forced to buy AI stocks in proportion to their weight in stock indexes such as Nasdaq or S&P.
This may not happen right away, but it will happen.
Mr. Musk has been lobbying for SpaceX to join the index quickly, which would force index funds to buy the stock regardless of the stock price, giving the company a big boost. The tech-heavy Nasdaq changed its rules to speed up the listing of giant companies like SpaceX. FTSE Russell similarly eased the entry of megacap stocks into its US indexes.
Standard & Poor’s abides by that rule. This means SpaceX will have to report a profit, but the company, which has not yet made a profit, will have to wait about a year before offering a minimum set of shares to the public and entering the S&P 500, the most-watched index. Additionally, SpaceX is offering less than 5% of the company’s stock, which will limit its footprint for the time being.
But if SpaceX follows the pattern set by large companies after its IPO, about half of its shares could be publicly traded by the time it joins the S&P 500 next year. This would give him a roughly 1.5% share of the S&P 500’s more than $60 trillion market capitalization, forcing index funds to pour hundreds of billions into Elon Musk’s bet to become the world’s first trillionaire.
If this sounds like a risky bet, it is. Having sought to destroy the federal bureaucracy under the leadership of the “Führer,” firing employees, and knowingly contributing to the dismantling of USAID at the cost of hundreds of thousands of deaths, Mr. Musk will now have exclusive control of the company on which the retirements of many Americans may depend, and will be able to follow his baser instincts wherever he goes.
And that’s not half of it. The so-called “Magnificent Seven” tech companies, including Nvidia, Alphabet, Apple, Amazon, Microsoft, Meta, and Tesla, already account for more than a third of the S&P 500’s market capitalization. Investors’ views on large-scale AI investments by tech giants are largely determining the ups and downs of the stock market as a whole. Adding SpaceX, OpenAI, and Anthropic to this set would free tech billionaires from any government regulation and give them greater control over the economic future of Americans pursuing their dystopian sci-fi dreams.
There may be some kind of glimmer of hope. Incorporating large amounts of AI stock into retirement plans could provide a hedge against newly unrelated workers displaced by artificial intelligence and give them some rights to the economic fruits of the new high-tech economy. But the balance of risk is pointing in the wrong direction. A future in which new AI agents greatly increase economic productivity and drive human prosperity to unprecedented heights remains an aspiration. Claims about amazing advances made by modern AI models may well be true. But nothing can match the huge productivity gains. Dystopian scenarios seem more likely than ever, even though the economic rewards investors are expecting remain far off the horizon.
Money eventually gets boring. It’s scary. We will move on to a new story. The Nasdaq recently snapped out of its optimistic stupor and fell more than 4% on hints that a strong labor market could force the Federal Reserve to raise interest rates this year. This should remind us all that the AI extravaganza that lit up the Nasdaq and S&P 500 last year could come to an abrupt end, perhaps on the back of Mr. Musk’s millionaire moment.
Americans have no idea what an AI-centered future will bring. But they vividly experience the pain that spreads through society when financial bubbles built on hubris burst. If the dream of AI in investing turns into a nightmare, the Great Financial Crisis of 2008 will look like a cartoon compared to what will befall most Americans’ finances.
