My latest thoughts on artificial intelligence (part 2) and why I'm hedging my bets
1) Today, let's pick back up on the conversation about artificial intelligence ("AI")...
In Friday's e-mail, I noted that a massive question is hanging over the technology:
Will businesses pay up for AI, warranting the massive amounts – trending toward trillions of dollars in the coming years – being spent on it?
And as I said:
The answer will largely depend on the extent to which AI can replace humans. In other words, if businesses can use AI to reduce headcount – or grow without having to increase headcount – then they will pay a lot of money for AI.
I've talked to many friends who say this is already happening...
A partner at a major New York law firm told me his firm hired 10% fewer new associates this year.
And as another friend who runs a hedge fund said to me in a private message:
My investment in AI shows up as cost savings (legal fees, accounting, consulting, analysis), time savings, and generally more efficiency. Also better decision making for sure. This is monetization. It's just hard to quantify for now.
Also, personally, AI has already saved me thousands of dollars in nutritionists, lawyers, doctors, school advisors, etc.
I'm quite optimistic about AI.
Finally, a friend who runs an architecture firm says he hasn't reduced his headcount. But he says AI has made everyone more efficient – for example, a proposal to a client that used to take 30 minutes now takes 30 seconds.
These anecdotes are backed up by data across the entire economy...
Let's start with the fact that more and more companies are using AI, as this chart shows (shared by Creative Planning's Charlie Bilello on social platform X):
It's hard to prove that AI adoption is causing it, but there was a huge spike in layoffs in October. As this Times of India article notes:
American companies announced 153,074 job cuts in October 2025, marking the highest total for the month in over two decades...
The October figure represents a staggering 183% surge from September's 54,064 cuts and a 175% increase compared to October 2024, according to data released by outplacement firm Challenger, Gray & Christmas. This brings the year-to-date total to 1,099,500 job cuts – a 65% jump from the same period last year and the highest level since the COVID-19 pandemic in 2020.
And as these charts from the Economist show, layoffs may be affecting junior employees most:
I'll also note that the companies embracing AI the fastest and to the greatest extent, the tech giants, seem to be laying off lots of people. Most notably, Amazon (AMZN) plans to cut as many as 30,000 corporate jobs.
And there has certainly been a disconnect with the stock market...
Since late 2022, stocks have exploded upward... but job openings have declined. Take a look at the St. Louis Federal Reserve's chart in this post on X:
Meanwhile, three recent Wall Street Journal articles that tie into all this caught my eye:
A leaner new normal for employment in the U.S. is emerging. Large employers are retrenching, making deep cuts to white-collar positions and leaving fewer opportunities for experienced and new workers who had counted on well-paying office work to support families and fund retirements. Nearly two million people in the U.S. have been without a job for 27 weeks or more, according to recent federal data.
Behind the wave of white-collar layoffs, in part, is the embrace by companies of artificial intelligence, which executives hope can handle more of the work that well-compensated white-collar workers have been doing. Investors have pushed the C-suite to work more efficiently with fewer employees. Factors driving slower hiring include political uncertainty and higher costs.
It is the corporate gamble of the moment: Can you run a company, increasing sales and juicing profits, without adding people?
American employers are increasingly making the calculation that they can keep the size of their teams flat – or shrink them through layoffs – without harming their businesses. Part of that thinking is the belief that artificial intelligence will be used to pick up some of the slack and automate more processes. Companies are also hesitant to make any moves in an economy that many still describe as uncertain.
Corporate America has ended its firing freeze...
Now things are looking a bit more like the 1990s, when many big companies were focused on eliminating workers they felt were no longer needed...
A number of things could be at play in companies' increasing comfort with layoffs, including optimism over artificial intelligence, but they all come down to the bottom line. Labor is a major cost, and cutting it is one way to bolster profit margins. Tariffs could be adding to the urgency, especially for companies weighing whether and how to pass through the higher costs they are paying for goods on to consumers.
In summary, I'm not sure whether all the spending on AI is a wasteful bubble or not. (The telecom/Internet and housing/debt bubbles were so much more obvious!)
I'll keep collecting information and continue watching developments on it all. And I'll let you know if/when I come to a definitive conclusion.
In the meantime, I'm doing what I always do when there's uncertainty and ambiguity: Hedging my bets.
When it comes to stocks, I continue to like Amazon, Alphabet (GOOGL), and Meta Platforms (META) – in that order.
At the same time, I have also been bullish on stocks like Berkshire Hathaway (BRK-B), Global Payments (GPN), and Joby Aviation (JOBY).
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.
P.P.S. Over the weekend, friends sent me links to two videos that purport to show Elon Musk and Warren Buffett weighing in on political matters. Both are AI-generated fakes. Don't be fooled!