The week the AI scare turned real and America realized maybe it isn’t ready for what’s coming

For months, the threat of artificial intelligence (AI) replacing human workers has loomed over the American economy like a distant storm. However, this week, the storm made landfall, as viral doomsday essays began to materialize into reality.

The Catalyst: Viral Essays and Economic Panic

AI executive Matt Shumer stirred the pot early in the month with an essay posted to X.com (adapted for Fortune) that argued forcefully for white-collar workers to be concerned. He likened the moment to February 2020, when the pandemic was rapidly approaching U.S. shores, leaving a largely unprepared public. This essay has since garnered 85 million views on the platform.

Shumer was not alone in his warnings. Citrini Research, a leading finance Substack, published a similar essay on February 22, cautioning about a “global intelligence crisis” stemming from rapid advancements in AI. The speculative yet resonant piece painted a doomsday scenario of a “human intelligence displacement spiral,” where AI agents could swiftly replace software engineers, financial advisors, and middle management.

At the core of this narrative was the concept of a “ghost GDP”—economic output that benefits the owners of computing power but never circulates through the human consumer economy. In this scenario, high-paying salaries would vanish, leading to defaults in the $13 trillion residential mortgage market, spiking unemployment above 10%, and a stock market correction of 38%, ultimately resulting in a deflationary spiral.

The Market Reaction

Uncharacteristically for a work of speculative fiction, the market reacted to the Citrini piece, indicating that the “AI scare” trade was real in the minds of investors. The Dow Jones Industrial Average dropped over 800 points (1.66%) on Monday, with software stocks particularly hard hit. Analysts and economists quickly responded, asserting that the economic implications of Citrini’s argument were flawed.

However, on Thursday, Twitter co-founder and current Block CEO Jack Dorsey shocked the market by announcing a significant 40% downsizing of his company’s workforce. In a statement to shareholders, he noted that “intelligence tools have changed what it means to build and run a company.” Following this announcement, Block’s stock surged nearly 14% the next day.

Shumer remarked, “This is one of the first major examples of AI driving layoffs, but certainly not the last.” He urged readers to reevaluate their beliefs if they thought such changes wouldn’t affect them, calling it possibly the most important reflection they could undertake.

Contrasting Perspectives

While many Wall Street banks, top economists, and even AI CEOs consider the situation to be overblown hype, others adopt a middle ground, predicting a challenging but ultimately positive transition due to AI. However, the layoffs at Block suggest that the AI scare is shifting from mere narrative to stark reality, and America appears unprepared.

The Disconnect: Millions on the Edge

Veteran macroeconomic analyst Albert Edwards of Societe Generale is known for his contrarian views. In 2023, he speculated about the phenomenon of “greedflation,” which he argued could signal the end of capitalism as corporations raised prices excessively, harming the working and middle classes. Edwards claimed that the Citrini research validated his analyses, stating, “The AI macro doomsday scenario is not for 2028; it’s here right now!”

He highlighted that U.S. consumers were “running on fumes,” with incomes having “hit a brick wall” during this greedflation era. Edwards suggested that if he were 18 today, he would avoid university due to the burdens of debt and poor job prospects, opting instead for a trade.

Real-Life Impacts: Stories from the Ground

Nicole James, a 42-year-old former creative executive who built Snapchat’s content team, embodies the reality Edwards described. After serving in increasingly senior roles, including as head of content at the animation studio Invisible Universe, she was laid off when the company pivoted to AI. Since then, she has struggled to find full-time employment despite sending out hundreds of applications.

James shared her experience of working retail to make ends meet, expressing a profound loss of identity. “I felt embarrassed when I showed up to work the first day and put on my name tag,” she admitted. “It’s shocking. I feel like I just fell off a cliff.”

The Vibecession: A New Economic Reality

Laks Ganapathi, founder of the independent investment research firm Unicus, noted that many Americans feel as if they are on the edge of a cliff or falling. Her firm produced a research note similar to the Citrini scenario in January, which they termed the “vibecession.” This term, popularized by economics writer Kyla Scanlon, forecasts high unemployment and persistent inflation into the latter half of 2026.

Ganapathi predicted that companies would rapidly adopt AI, leading to significant job cuts and even the collapse of some businesses. She emphasized that a disconnect would persist between economic data and the lived experiences of many Americans, exacerbated by AI advancements. “The U.S. economy won’t experience a clean, single-event collapse,” she warned, suggesting that millions could find themselves in a continuous tumble off a cliff.

Wall Street’s Pushback

In response to the growing fears, Wall Street has attempted to calm the market. Citadel Securities published a critique of the Citrini essay, arguing that if AI were as destructive as claimed, the demand for software engineers would not be up 11% year-over-year. They contended that the doomsday thesis overlooks the physical constraints of energy and compute power that naturally limit infinite AI expansion.

Historically, productivity shocks have lowered marginal costs, expanded output, and increased real income, acting as complements to human labor rather than strict substitutes. Other critics, including Tyler Cowen and Robert Armstrong, echoed similar sentiments, while Morgan Stanley urged investors to remain calm, asserting that while AI will alter the labor force, it will not lead to a complete economic collapse.

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