AI Panic Returns to Wall Street as Taleb and Citrini Sound the Alarm
The so-called “AI scare trade” is back — and this time, markets are reacting with force.
A wave of selling swept through payments and software stocks on Monday after a bearish weekend report from Citrini Research reignited fears about artificial intelligence’s disruptive potential. The shock was strong enough to send shares of IBM tumbling in their steepest single-day decline in a quarter century, underscoring just how sensitive investors remain to any shift in the AI narrative.
The spark came from a relatively obscure but provocative analysis published by Citrini Research, which laid out systemic risks AI could pose to segments of the global economy — particularly industries heavily reliant on knowledge workers and scalable software models. The report quickly circulated among institutional desks, amplifying concerns that the AI rally may have run ahead of economic reality.
Adding fuel to the fire was Nassim Nicholas Taleb, the author of The Black Swan, who warned that the market may be underestimating the fragility embedded in the current AI-driven boom. Taleb suggested investors should prepare for heightened volatility and even potential bankruptcies in parts of the software sector if expectations around AI monetization falter.
Markets Rethink the AI Premium
For months, artificial intelligence has powered one of the strongest thematic rallies in recent memory. But as valuations stretched and capital poured into companies positioned as AI beneficiaries, skepticism began to build beneath the surface.
Alap Shah, chief investment officer at Lotus Technology Management and co-author of the Citrini report, said the intensity of Monday’s selloff surprised even him. Speaking to Bloomberg TV, Shah argued that policymakers should begin preparing for large-scale labor displacement, suggesting governments may need to explore taxation frameworks around AI systems to soften the impact of potential job losses.
His central thesis is blunt: the more capable AI becomes, the fewer human roles are required across certain white-collar industries. That prospect raises not only corporate earnings questions, but broader economic and social stability concerns.
The debate now confronting investors is whether AI represents a productivity revolution that justifies premium valuations — or a structural shock that markets have yet to price correctly.
Geopolitical Risks Add to Fragility
The renewed AI anxiety comes at a moment of broader geopolitical and macro uncertainty.
Four years into Vladimir Putin’s war in Ukraine, efforts to broker peace appear stuck. Diplomats describe negotiations as deadlocked, with battlefield dynamics largely frozen. Allies say the US is pressing for progress ahead of July 4 celebrations marking the 250th anniversary of American independence — an event expected to be hosted by Donald Trump — but there is little sign Moscow is prepared to compromise on core demands.
Meanwhile, trade tensions are resurfacing between Washington and Brussels. The European Commission has warned that new US tariff measures could push effective levies on certain EU exports above agreed limits under existing trade arrangements. Lawmakers were told that the newly introduced global tariff would stack on top of existing duties, potentially driving cumulative rates beyond the 15% ceiling for some goods.
A Market on Edge
Taken together, the reemergence of AI skepticism, stalled geopolitical negotiations, and rising trade friction are testing a market that had grown comfortable with a narrow group of growth leaders driving gains.
The AI trade is no longer just about optimism — it’s becoming a battleground between believers in technological acceleration and skeptics warning of mispriced disruption.
For now, investors are being reminded of a lesson Taleb has long emphasized: markets built on momentum can shift abruptly when confidence cracks. Whether this latest episode marks a temporary correction or the start of a deeper reassessment remains to be seen — but the era of unquestioned AI euphoria may be over.
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