AI: The end of the socioeconomic rainbow or business as usual?
It’s 2025, and virtually all of the US economy stopped growing, stock market values notwithstanding, except for the AI sector. Unreal investments in datacenters, a $3 trillion-dollar valuation of Nvidia, a chip war with China, and US attempting to partake in socialism through IBM are some of the signs you’ll see of the AI boom showcasing unusual market signs. There were warnings about overinvestment and comparisons to the telecom boom and the dot com boom, but how can a company resist the allure and the ease of chatbots, imprecision, hallucinations, and lack of profitability aside? Consumers want the ease of the shopping experience, and yelling at a customer service chatbot won’t get you disconnected. Seems like a winning formula, especially, when reminded that it’s far more cost effective than hiring local talent, or even outsourcing work to another country.
Here is another interesting tidbit: AI investments are actually propping up the economy now, while other investments aren’t showing up. They even overtook consumer spending, which has been the main indicator of the economy, since the Reagan times. Consumer spending could slow down, negatively impacting the economy, but never too drastically. What about the fate of AI investments?
What happens when so much money goes toward AI? The investment budget doesn’t just magically increase with a new trend. Other sectors get the short end of the stick. That’s not to mention the enormous demand for electricity, needed for AI, pushing prices higher for everyone, while contributing to global warming.
On the staffing side, it feels like most technical departments have seen a variant of this theme: a 10-person IT department became a 3-person group after layoffs, and the remaining three moonlight as ‘glorified AI operators’, churning code at incredible speeds, while piecing it together feverishly, feeling like misguided SDETs.
Some companies, decided to lay off less critical staff and hire AI employees instead. That turned into an uneven game of yesterday’s stars struggling to find relevance in this market, while few exceedingly technical PhDs got a $1 million or more in annual income.
Wells Fargo has been laying people off for the past 5 years, resulting in a stock price increase of 228%; while Bank of America shed almost 90,000 employees over the last 15 years and nearly doubled its stock price over the last 5 years alone. Why not use AI as an excuse for the same as well?
Just earlier this year, for example, Meta laid off 5% of its workforce, or 3,600 people, and hired a few ML engineers, while touting it as getting rid of less efficient hires and focusing on the future. The cuts vastly outnumbered new hires, obviously.
Microsoft began the year by laying off 9,000 employees, or 4% of its workforce, totaling 15,000 jobs in 2025 thus far, but new investments go to AI chips, datacenters, and further AI automation, not any hiring.
Same with Amazon and its 14,000 layoffs from earlier this year, despite, or perhaps resulting in, a 28% increase in stock value over the last year.
On the other side of the world, robotics are already becoming an active part of military engagement, while in the US, some states are using them for law enforcement efforts. Driverless taxis by Waymo and Tesla are expanding. Miso Robotics is letting fast food joints avoid hiring staff. Xbox, and its studio behind the infamous Candy Crush Saga, hired AI engineers to build AI tools for game development, just to lay them off, once they were done making their artificial replacements.
Verily, a product of Google X lab efforts, shut down its devices program in favor of investing in AI, or as its CEO eloquently put it, ‘investment of the resources necessary for the long-term growth.’
Google itself got rid of more than a third of their managers and isn’t planning to stop, focusing on making remaining employees a version of AI operators.
IBM, Intel and others are following the same tendency.
According to HR Dive, 34% of CEOs plan to enact layoffs in the next 12 months, resulting in more planned layoffs than hires for the year ahead.
Now, warnings and potential side-effects aside, are the cracks beginning to show in the AI frenzy? Similar to the pandemic’s Big Tech ‘over-hiring spree’, first come the ‘soft signs’: Meta reorganizing Meta Superintelligence Labs, while getting rid of some AI talent already.
Salesforce replaced 4,000 employees with AI, resulting in temporarily higher revenue, but issued weaker guidance for the next quarter, sending its stock down, as AI doesn’t seem to equal long-term gains just yet.
Figma, an interface design tool maker, also sees a drastic slowdown this quarter, after initially making a splash and going public.
The question becomes whether AI advances are actively misplacing employees or making life easier. Eliminating earning consumers may sound questionable, but charging a million dollars or more for a personal robot will likely make up for an army of minimum wage unemployed staff.
When OpenAI came out with GPT-5, it touted it as a complete revolution in generative AI. It offered automatic ‘deep thinking’ at no extra charge and promised to impress the world. Instead, it just took GPT’s ‘personality’ away, resulting in a backlash. It also began hallucinating more than before and offered repetitive mistakes, instead of solutions. GPT-5 did attempt to rebrand as a ‘more to the point’ and more business-minded solution, supposedly pushing users to use it as a true business assistant, as opposed to a therapist, a friend, or romantic interest. Obviously, it would force users to abandon the $20 a month plan for the $200 one, which made sense, after a huge infusion of investments from Softbank. Still, consumers spoke out and brought back the ‘legacy’ 4o model, albeit it has to be switched each new session.
Talking about consumers, the implementation of AI seems to result in higher unemployment, at least in the short term. Prospects for the future aren’t promising an improvement, in terms of human employment opportunities. With diminishing buying power, at what point will AI ‘stop being worth it’, as it can’t pay for itself? A little over a century ago, drastic wealth inequality produced series of uprisings in Europe, resulting in formation of USSR and socialist government. With its support for Vietnam’s Viet Cong, Cuba’s Fidel, China, and North Korea, socialism spread all over the world. USSR failed eventually, but capitalism may have just found its own Achilles’ heel in becoming ‘too efficient’ with AI and having less need for people. The European Union has a vast economic impact, but without the support and partnership of the US, maintaining global balance is becoming more and more difficult.
Economically and militarily, the US hasn’t had this much opposition since before the 1980s perestroika in USSR and Eastern Europe. Putin is busy trying to restore Russia’s previous might. Belarus’ Lukashenko is onboard with that. Armenia, Kazakhstan, Kyrgyzstan, and Tajikistan already have been members of Collective Security Treaty Organization with Russia. Moldova and Georgia support it as well. That’s just over half of former Soviet Republics, and with Putin’s plan to occupy Ukraine, or ‘liberate’ it, as he calls it, it may just be a matter of time till it becomes a reality.
In addition, China, North Korea, India, Iran, Russia, and others formed Axis of Upheaval to oppose the US’ new approach to the world; while Brazil, South Africa, Indonesia, Ethiopia, Egypt, UAE, Russia, Iran, China, and India have formed a financial alliance called BRICS.
Capitalism in its purest form just feels less attractive, when it makes life less affordable, as opposed to present opportunities for growth. Mamdani’s surge in popularity in New York City, over a political veteran Cuomo, or the current Mayor Adams, is another proof. Even AOC became more popular than Schumer by now, and her socialistic views are well-known. Bernie Sanders, an admitted socialist, almost became President twice as well, although he only predicted today’s economic conditions back then, not campaigned through them.
Now, Mitch McConnell called the current period ‘the most dangerous period since before World War Two. There’s certain similarities right now to the 30s’.
He said that, as the current administration is toying with a few concepts at once: trying to implement socialism, through taking a government stake in Intel; seeking a far higher than in previous administrations level of power, while defying court orders, and litigating every major decision up to Supreme Court, which in itself seems to be happy to embrace a widely expanded power of a President; and pushing the boundaries of capitalism, by cashing in on own crypto, investing heavily in bonds before forcing the Fed to lower interest rates, already promoting the ‘Riviera of the Middle East’ concept, while sharing an AI-generated video of Trump Gaza planned there, after constantly having a prevailing hand in the outcome; and upending the global economy through a burst of unexpected, heavily challenged due to its legality, and economically widely seen as harmful tariffs.
McConnell’s fear is a global economic depression, like the aftermath of Smoot-Hawley tariff bill being signed by Herbert Hoover. When you combine those factors with staff displacement due to AI implementation, it paints a very complex picture of the future. The same administration bringing about these changes is simultaneously promoting widespread AI adoption. Together, even if differently, these forces unsettle the global economy.
In the meantime, Americans still have far more to lose than ‘just their chains’, as Karl Marx said about the proletariat, or the working class. Provided AI becomes an actual boon for people, not just an excuse to reduce headcount, it may only boost the supremacy of capitalism. Even China’s economy stopped being a product of pure socialism long ago. Yet, for now, the writings on the wall tell a different story, with no signs of easing. Future economic factors remain undetermined, but the immediate effect from companies falling in love with AI, while turning their backs on people, is already having a powerful impact.