A viral hypothetical scenario published on Substack earlier this week sparked significant stock market declines, prompting a detailed rebuttal from one of Wall Street’s leading firms. Citadel Securities has pushed back against fears of AI displacement after a post from Citrini Research outlined a dystopian future where artificial intelligence triggers widespread unemployment and market losses. The post, titled “The 2028 Global Intelligence Crisis,” was published Sunday and quickly gained traction among investors concerned about AI disruption.
Written from the perspective of June 2028, the Citrini post presented specific figures including a 10.2% unemployment rate and an S&P 500 down 38% from its late 2026 peak. The note questioned whether AI market bullishness could ultimately prove bearish for the broader economy, warning that AI paying off for investors might come at the expense of workers and economic stability.
Citadel Securities Challenges AI Displacement Narrative
However, Citadel Securities macro strategist Frank Flight argued that Wall Street’s reaction to the doomsday scenario was significantly overdone. Flight countered with current real-world data, noting that the unemployment rate stands at 4.28%, AI capital expenditures represent 2% of GDP at $650 billion, and job postings for software engineers have risen 11% year-over-year. Additionally, approximately 2,800 data centers are planned for construction in the United States, according to the firm.
The firm examined data from the St. Louis Federal Reserve to assess AI displacement risks among the US labor force. According to Citadel Securities, statistics on daily AI use for work show little evidence of imminent displacement threats. “The data seems unexpectedly stable and presents little evidence of any imminent displacement risk,” Flight wrote in the rebuttal.
Infrastructure Constraints Limit AI Adoption Speed
Meanwhile, Citadel Securities highlighted that early AI adoption remains expensive and slow-moving, contrary to assumptions of rapid workforce replacement. The firm noted that while AI systems may theoretically improve continuously, the reality involves significant hurdles including integration costs, diminishing returns, and regulatory expenses. These factors are being overlooked by investors focused solely on AI displacement fears, the strategist indicated.
The pace of AI adoption directly affects displacement risk, according to the analysis. Flight emphasized that economic deployment remains constrained by physical capital requirements, energy availability, regulatory approvals, and organizational change management. This contrasts sharply with narratives assuming frictionless intelligence replication, the note said.
Supply Shortages and Energy Demands Slow AI Integration
Beyond deployment challenges, AI workloads require substantial computing power that remains in relatively short supply. Chip shortages, lengthy and costly data center construction timelines, and energy constraints all represent bottlenecks where AI-driven demand outpaces available supply. These infrastructure limitations will not resolve quickly, meaning even advanced AI systems would face significant barriers to replacing human workers economically.
Additionally, while AI adoption has been a key talking point among corporate executives, actual AI-related layoffs remain less widespread than doomsday scenarios suggest. Some companies have tied job cuts to cost reductions aimed at funding AI spending rather than direct technological replacement of labor, according to industry observations.
Historical Productivity Gains Offer Economic Perspective
Flight outlined that major technological advancements throughout history, from steam power to the internet, have consistently proven disinflationary and growth-enhancing. A productivity shock from AI would typically translate to higher output and increased incomes, both positives for the global economy, the Citadel Securities analysis indicated. If companies produce more at lower costs, prices fall and margins expand, bolstering real purchasing power and fueling consumption.
In contrast to bearish predictions, the economic analysis suggests that scenarios where productivity surges while aggregate demand collapses violate fundamental accounting identities. The argument that AI directly replacing labor would reduce consumer demand overlooks how productivity gains historically expand economies rather than contract them, according to the firm’s assessment.
Investors will continue monitoring AI adoption rates and labor market data for signs of acceleration or displacement risks, though current indicators suggest fears may be premature. The debate between optimistic and pessimistic AI scenarios remains unresolved as businesses navigate integration challenges and infrastructure constraints.
