Global AI Supercycle Raises Productivity Questions

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1:57I'm Jess Minton with Alexis Christophoris, in for Carol Masser and Tim Stenevic, who will be back tomorrow at the Future Proof Conference in Huntington Beach, California. And Alexis, we've been talking so much about AI. I mean, we do pretty much every day, right? Yes. But just looking at today, the basket of MAG7 stocks that we have in the terminal, it's actually up slightly, up 0.4%, which might be a little bit of a surprise, but that, of course, houses those MAG7 stocks like NVIDIA and other companies. But still, if you look at a year-to-date basis, the NASDAQ 100 is up about 16%. And that basket of MAG 7 stocks trailing that only up about 6%, 7 % relative to that, just because a lot of the plays have been more in the memory space and other chip makers.

2:37But, of course, we have that other impact we're talking about economically when it comes to how does this transition to jobs? And apparently the fear of people worried about losing their jobs to AI. Everybody wants to know, okay, what is AI going to do to my life, to my pocketbook, to my job? Right. And how that affects your career, your families, your livelihood. And so who better to bring in than Tom Orlick, Bloomberg Economics Chief Economist joining us from Washington, D.C. And you have a new report that you put out today. Walk us through this about this AI apocalypse potentially for millions of workers.

3:07And you ask you pose that as a question and you're saying the reality potentially, but maybe we're just not there just yet. so great to be here jess um so the big question there's so many big questions about ai one big question is what does this mean for the economy um is this going to be a boom for worker productivity and wages is it going to make us all smarter all better at our jobs all more valuable to our employees um or is this going to be something more like factory automation which put a bunch of blue-collar workers out of a job in the 80s, 90s, and 2000s? Are we going to see a wave of white-collar redundancies as Claude and other models put us out of a job?

3:55So at Bloomberg Economics, we've been making the calculations, running the models, and doing that for the US and a range of other countries. We don't have definitive answers, right? This technology is still evolving. But what we do have is a kind of a range for what the estimate might be. At the top end, if we look at AI hitting its full potential, we're looking at hundreds of millions of workers, perhaps as many as 380 million workers worldwide, that we're going to see their jobs significantly impacted, significantly disrupted by this new technology. When you say disrupted or impacted, does that mean they'll be using AI in some way in their jobs?

4:42Does that mean they will be displaced by AI? What can you tell us? So the way these calculations work is the first step is to break down a job into a set of tasks. Right. And then to think about which of those tasks AI could do and which of those tasks AI can't do. Right. So maybe think about two stylized examples. Right. Think about a computer coder. Well, most of the tasks a computer coder does, AI can do. So computer coders are one of the jobs which has already been pretty significantly disrupted by AI. Well, now think about the other end of the spectrum. Think about perhaps a hairdresser. Well, could AI help with the bookings?

5:32Sure, a little bit. Could it help with keeping up with latest trends, latest styles? Yeah, a little bit. But most of it, AI is not going to be able to do. Right. So that hairdresser, their job's pretty secure. So what we did was we looked at all of the jobs in the economy and then we broke those jobs into tasks. And then we looked at which tasks AI is going to be able to do and which tasks AI is not going to be able to do. And for jobs where more than 50 percent of the tasks, more than 50 percent of what's done in that job, AI could have a significant impact. Well, those are the ones which we include in our calculation.

6:11And if you add that up across all the countries we look at worldwide, well, that's how you get to our 380 million number for the number of jobs that are going to be significantly impacted potentially by this new technology. Well, Tom, I think we're all running out to be hairstylists now. What other jobs or industries, sectors were, I don't want to say AI proof, but may fare better, let's say, in terms of workers not being displaced? So I think the way to think about this is really, to put it crudely, white collar, blue collar, right? 1980s, 1990s, 2000s, blue collar workers faced two massive disruptions.

6:55first from factory automation, the arrival of robots on the factory floor. And secondly, if you were a worker in the US or Europe, from the rise of the rest, right, the rise of China, globalization and your job being outsourced. But white collar workers, they were pretty secure, right? The AI revolution is going to be hitting the white collar workers hard, right? You're an accountant, you're a computer coder, you're a trader, you're an economist, unfortunately, AI is going to bring some pretty significant disruption. If you're in the blue collar world, if you're working in a factory, if you're working in, I guess what we might call the sort of the human touch services professions, you're a hairdresser, you're a sports coach, well, well, AI ain't coming for you.

7:52That's where the greatest security is going to be. So tell me what exactly are AI skills in the sense of, is that something like you're getting a STEM related degree, those types of industries, how do you acquire those types of skills? Oh, that's a really interesting question. And I think one of the sort of funny facets of this kind of dynamic is, is AI going to have a huge impact on the labor market? Yes. Could that impact be significantly negative? Could we see a wave of unemployment? Yes. Anthropic just put out a report saying that potentially unemployment in the United States could move above 10 % as AI displaces knowledge workers.

8:38But right now, if we look at the impact of AI on the labor market? Well, first, it's difficult to see much evidence of significant displacement, not many people losing their jobs because of AI right now. And in fact, it's a little bit the reverse, right? Huge demand for people at the really, really top end of the job spectrum to kind of build the models, demand for people to help train the models, right? You're a specialist in a particular sector. Well, right now, there's demand to help train AI models to make people in that sector smarter, perhaps in the long run, to replace some of those workers.

9:20And, of course, demand for all of those construction workers to build the data centers, the kind of the brains of the AI universe. So one of the interesting findings from our research was, if you look not too far into the future, three, four years into the future, scope for huge disruption, right? More productivity if we want to be positive about it, more unemployment if we want to be negative about it. But right now, we don't see so much of that downside. But in some parts of the world where we're building the models, where we're building the data centers, actually, we are seeing a boost to employment.

9:57Interesting. But Tom, what about new grads, those people who are in college right now? We're hearing a lot about people who went in getting one degree, maybe in computer programming or in finance. They're coming out there. They're having a hard time finding jobs because AI is being used by so many companies for sort of that low and, you know, those entry level positions. Are you finding that that's the case? you know it's funny i was having a chat with a friend of mine over the weekend a young guy who's just graduating uh in computer engineering and i said you know are you worried about this um and you know this is just one anecdote but he said um everything i read in the newspapers everything i read online tells me i have no career i have no future everything i see in my email as i apply for jobs as I apply for internships tells me I'm going to get a job next week, right?

10:54So just one example, certainly a lot of news out there about young grads finding it harder to get that first step on the jobs ladder. Are we seeing that so much in the data yet? Well, something to pay close attention to. What are your thoughts on the AI boom and bust here? What are the risks and what do you think are the potential optimistic signs there that people might be overlooking? So if we think about like the history of technology, right, game-changing technologies like railways, like the internet, what we see very often is a pattern where there's huge enthusiasm for the technology, capital piles in, valuations go sky high, But then the profits, they're not so quick to materialize.

11:47And there's a moment of pessimism and there's a crash. And then people work out what's really going on and we see the benefits. We saw that most vividly with the dotcom boom bust cycle, the late 90s, early 2000s. The market roared, the market crashed. Did that mean it was the end of the dotcom story? No, in some ways, it was just the beginning. And the internet revolution was very much the story of the 2000s. Well, I think the concern with AI is that we see something similar, right? This does turn out to be a game-changing technology for good or ill. But before we get to that broad application, right, before we get to that world where AI is kind of part of our lives, making us all more productive, we have that boom bust cycle in the markets.

12:41And with valuations for AI companies in the US extremely high, well, some people think that that boom bust cycle is actually something that we're looking in right now.

12:56Stay with us. More from Bloomberg Businessweek Daily coming up after this.

13:04Bloomberg Businessweek Daily is brought to you by HPE, bringing you the self-driving network, a network that's self-optimizing, self-healing, and self-protecting, and only continues to get smarter. Learn more at hpe.com slash networking. Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version.

13:41So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com by selecting Work Mode, available on Plus and Pro plans. This is Alexis Christophorus for Bloomberg Surveillance. AI is everywhere. Outcomes are not. Not because AI doesn't work, but because AI hasn't reached the workflows yet. The campaigns, the launches, the quarterly planning, those workflows are still run by humans alone. AI is making individuals faster, but it's not making businesses more productive.

14:22That's the gap Asana is built to close. Asana is the operating system for human agent teams, your easy button for AI productivity across every team. Ready-to-go AI teammates pre-built for marketing, ops, and IT. No prompt engineering, no setup. They show up where the work is happening, already onboarded in your workflows, ready to deliver. And the more they work with your team, the smarter they get. With Asana, your whole company can work on the same plan towards the same goal, whether you're a team of 10 or 10 ,000. Asana, where humans and agents workflow together. Try it at asana.com. That's A-S-A-N-A dot com.

15:04Shipmakers today dragging down stocks as leaders of AI giants propose slowing the technology's development. And there's just been so much activity. I just want to run down what some of these CEOs are saying. So Anthropics CEO Dario Amodi proposing slowing development of the most advanced systems to prevent AI slipping beyond human control, he says. And then even just seeing overall in the market, seeing Samsung as well as SK Hynix under pressure. But then the opposite side of that AI play, you're seeing cybersecurity shares higher today, as well as software basically benefiting from the opposite side of that spectrum there.

15:37So it's a very large dynamic when you're thinking about who's winning, who's losing in this dynamic when you get a headline like this. For sure. Let's dig into it now with Mike Shepard, Bloomberg News Senior Editor of Technology and Strategic Industries, joining us from our Washington Bureau. Mike, great to see you. I know that these AI bosses are now clashing with our very own president who came out on social media today, criticizing them for wanting to put guardrails up on on AI development. How much of this is really about AI and the race with China for the U.S.? Well, from the president's standpoint, it's everything.

16:13He is saying that whoever wins in AI wins. And that was a statement he made while in Ireland for the Irish Open. And he told reporters that when asked about AI guardrails and whether there needed to be more restrictions on the technology, he brushed off the idea and said that this whole question about safety really takes a backseat to the need to stay ahead of China in the competition to develop the most advanced AI. You also have to remember that Trump and his administration have made AI development a centerpiece of their economic agenda. They see it as an engine of job growth, and they really don't want to see any move whatsoever to upset the apple cart.

16:57In another social media post, he also questioned why anyone would want to kill, as he put it, the golden goose. And that is language he has used to defend the rollout of data centers across the country that many in America have started to take exception to. And it's something that's even emerged as a political issue in the midterm elections. Hey, Mike. So Chinese officials obviously rejecting those calls to slow AI for safety reasons and also criticizing those claims by some American tech leaders that the progress by China posed a global security threat. So what ends up happening to the data center boom and also those valuations when you're thinking about a lot of those chip makers and other companies that are housed in that?

17:38You know, that is one of the big questions out there. What does this slowdown mean actually in terms of all the hundreds of billions of dollars in investments that are either planned or underway? And the two leaders of OpenAI and Anthropic made clear, hey, look, we do not intend to slow down overall our plans to grow our business or to make these investments. It's really just slowing our development of the most advanced models. Yet that wasn't as comforting as they thought it might have been to Wall Street investors who are really trading in the opposite direction. We see the Philadelphia Semiconductor Index, which is a benchmark of investment in AI infrastructure.

18:21That's down by almost 5 % today. And we're seeing losses in key chip makers on the day from Micron Technologies, which specializes in memory components for AI processors. And then, of course, NVIDIA, the world's most valuable company, which has really built an industry-defining business in making those GPUs that power data centers. Mike, today Microsoft came out with this manifesto, I guess we can call it, talking about what needs to be done in efforts to slow the development of AI. Can you tell us a little bit more about what's in that manifesto? Well, what they are trying to do is also make sure that their point of view as a stakeholder in all of this, they are not only a backer of open AI, but they do a lot of business with them.

19:11And they also agree that, hey, look, we need to make sure that humans stay in the loop, mostly in the development of AI. But it's a long manifesto, all 15 ,000 words of it. And whether it actually has that kind of concrete impact, though, Alexis, remains to be seen. And that is true also with the essay that Dario Amadei published on Saturday. In it, Amadei promised to have outside evaluators, third-party evaluators, come into the company to get a firsthand look with badges and all at how these models are being developed even before their release. But that's a big promise. And there are many on Wall Street who looked at those pledges and started to wonder, are they really going to follow through with all of this?

19:59And there is a question about whether some of it is marketing. And just brought up earlier the question of the Chinese government. They have accused the AI leaders here in the U.S. of fear-mongering, using the word from the Chinese foreign ministry earlier today. And they say that these companies are using it as a pretext to go the government here in Washington into imposing restrictions that would undercut China's efforts to develop AI on its own.

20:29Stay with us. More from Bloomberg Businessweek Daily coming up after this.

20:37Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com by selecting Work Mode, available on Plus and Pro plans.

21:20This is Alexis Christophorus for Bloomberg Surveillance. AI is everywhere. Outcomes are not. Not because AI doesn't work, but because AI hasn't reached the workflows yet. The campaigns, the launches, the quarterly planning, those workflows are still run by humans alone. AI is making individuals faster, but it's not making businesses more productive. That's the gap Asana is built to close. Asana is the operating system for human agent teams, your easy button for AI productivity across every team. Ready-to-go AI teammates pre-built for marketing, ops, and IT. No prompt engineering, no setup. They show up where the work is happening, already onboarded in your workflows, ready to deliver.

22:02And the more they work with your team, the smarter they get. With Asana, your whole company can work on the same plan towards the same goal, whether you're a team of 10 or 10 ,000. Asana, where humans and agents workflow together. Try it at asana.com. That's A-S-A-N-A dot com. From game day crowds to memorable meals, Genius by Global Payments keeps your kitchen and floor perfectly in sync. Real-time menus, seamless updates, big league reliability for any business. That's genius.

22:38Let's go to the Barclays Global Financial Service Conference in New York, where Bloomberg TV's Danny Berger is sitting down with Bank of America CEO Brian Moynihan. Jess, thank you so much. That's right. I am here with Brian Moynihan. Brian, thank you so much for joining. Great to see you today. It's great to see you again, Danny. And I want to start just because you did make a little bit of news just moments ago, speaking at this conference, saying that you expect trading to be flat for this current quarter and I wonder just what has changed in the environment because we obviously saw just such a big second quarter in this high watermark what has sort of changed in the overall trading landscape so I think to keep a perspective if we end up with a quarter what we just said flat it'll be one of the best third quarters that we've ever had in the trading history of the company so but what happened is it changed so last year's second quarter was liberation day 25 this year's second quarter compared to that was up a lot in trading and investment banking and things like that last year's third quarters was a recovery quarter from liberation day quarter and the tariffs coming in I know it's hard to remember that far away but all of us are running around saying oh my gosh the economy is gonna stop cold third quarter oh it got understandable easier everything kicked back in so now you're comparing that quarter with this year's third quarter this year then the AI trade came in and if you guys report about Korea and the leverage and all that stuff and all of us a lot of us come out of the system because people brought the risk down and when you put that together just a sheer volume activities now equities is up more and fixed income is bouncing around a little bit down and that ends up to flattish in but the team and Dennis and Sufyan and Jimmy's leadership the team is doing a great job it's just sometimes the market quits doing things and that's one of these times now the pipeline investment banking's full the activity level is strong but with rates move it up you know hundred basis points over a short period of time people pause a little bit and leverage coming out of the system for a while.

24:28Do you think that that pause in a more, again, relatively flat environment extends through the end of the year as well into Q4? I think as soon as we get some stability around the rate structure, I mean, they've got the Fed meeting this week and sort of what people get a common view of that, then the rates will settle at some point. I think that'll help some of the trading activity. We've got a lot of pipeline IPOs, secondary offerings, things coming on that we know we'll go through. But on the debt financing side, which is a big part of the activity, The issue is that you've got to have a rate structure that's not bouncing around so people can feel comfortable they can commit the issue into an issue a week later, a few days later.

25:04So it's good. But Yemeni activity is strong. The conversation is strong. We're flattish. It's$5 billion plus in revenue. It's good. Now the West Management Revenue will be up 10 to 15 percent. So you're trying to say to people, we're 60 percent core debt interest income. That's fine. It's doing everything we thought we'd do. We are managing expenses as well. The credit quality of the firm is good. that the consumers are spending. It's just that the trading activity was such explosive in the second quarter. Of course, when it mitigates, it feels a little bit strange, but then it'll get back and grow from here.

25:33It's maybe a good problem to have, Brian, when you set the high watermark that high that you can't get back there. So fair to say ramps back up fourth quarter. That's kind of what I'm hearing from you. Yeah, we'd expect the activity will settle in. And you've got the summer's the summer, and we lose a lot of activity in August anyway. But it's always traditional second to third quarter comes down. It's a comparison last year that's kind of got to be... So part of what we saw in the second quarter of this trading blow up, a lot was around the AI trade and situational awareness. And I wonder how you've rethought things.

26:00Obviously, Bank of America acting as a prime brokerage for situational awareness. Has anything changed post that whole blow up? We always look back at everything and without getting any clients. But you should assume that we have good versus manager practices then and now. We've made a lot of money. Second quarter, we've made money every day. The team does a very good thing. But that doesn't mean it won't change the environment pretty quickly when the world changes around it. I mean, the world is changing around us every day, Brian. And just sort of on a bigger scale, the concerns around AI have reached a fever pitch.

26:32I mean, you've not been shy about expressing your own concerns. I know you were on Bloomberg in July saying, I'm worried about, you know, structurally the impact AI could have. Now we're talking about humanity itself. Brian, as a corporate leader, as someone who is helping to implement AI in both your company and fund the trade more broadly, Lee, are you worried about the path that we're headed down right now? Well, last week I was on one of your competitor's shows, and they asked me the questions, did I slow down? And I said, I think they should slow down. But, you know, I'm not the person running these companies.