The AI Paradox

AI investment is propping up the U.S. economy.

Recent numbers paint a split picture: tech is powering markets higher, while much of the economy is slowing.

At the same time, CEOs like Walmart’s Doug McMillon are saying out loud what many of us already suspect: AI is going to take away jobs.

That’s the paradox retirees and investors can’t ignore: the same technology that is creating enormous investment opportunities is also reshaping the workforce in ways we’ve never seen before.

Microsoft, Amazon, Meta, and Google alone will be spending $400 billion this year on AI infrastructure. This huge sum of money will undoubtedly drive markets and economic expansion for many businesses downstream of that spend (I had a client in yesterday whose local employer has been hugely benefited from this phenomenon).

But McMillon made it clear: “It’s very clear that AI is going to change literally every job, maybe there’s a job in the world that AI won’t change, but I haven’t thought of it.”

As investors, how should we be thinking about this paradox? Should you invest more in the AI theme, or less? What risks could this bring about to your retirement?

To answer this question, let’s zoom out and look at other transformational technology events and their the downstream effects.

Because you only live once, you only retire once, and you have one portfolio supplying income and financial security in your golden years.

John D. Rockefeller. Andrew Carnegie. Cornelius Vanderbilt. J.P. Morgan. Henry Ford.

You know these names.

They entrepreneurs were not just entrepreneurs that defined a decade, they defined entire centuries and have gone down as some of the most important figures in U.S. history.

They had a unique combination of timing, drive, luck, and resilience that forged products and services laying the foundation for unprecedented economic growth in the 19th and 20th centuries.

Here is the break down by century:

• 1800-1900: 43.6x growth

• 1900-2000: 484x growth

• 2000 – today: 2.3x growth

To make these enormous gains, particularly in the 20th century, massive infrastructure projects needed to be funded and built to create the steel needed to transform metro plex’s, assembly lines needed to be built to assemble cars and ship them across the U.S., etc.

These projects were massive and the burden of risk fell on the financiers and the entrepreneurs crazy enough to create new products, new markets, and offer them at a low enough price for people to adopt.

The results of this cannot be understated.

Today, many of the world’s best entrepreneurs, executives, and economists are saying AI is going to bring about radical societal transformation, akin to the light bulb, or printing press, or the assembly line.

Only history will tell us who the economic Titans of the century will be. But we can already see some names: Jensen Huang of Nvidia, Elon Musk of Tesla and SpaceX, Mark Zuckerberg of Meta.

Their companies have created trillions in value and are owned by virtually every investor saving for retirement in the U.S. Your retirement account is likely directly tied to their ability to keep winning the AI race.

These “new Vanderbilts” are pouring hundreds of billions into AI, just as the railroad barons once laid track across America. The cost to build is in the trillions, but so are the potential rewards.

The question is: what is the upside for you in the disruption, and what are the risks to you and your family as this unfolds.

I wrote last week about the Fed's rate cut cycle and how business, life, and investing all happen in cycles.

Amidst this massive AI spending boom that is propping up the U.S. economy and global markets, economists, executives, and investors have a general theme in their commentary.

From a recent Wall Street Journal article covering a $15 billion data center in my home state of North Dakota:

“This week, consultants at Bain & Co. estimated the wave of AI infrastructure spending will require $2t in annual AI revenue by 2030. By comparison, that is more than the combined 2024 revenue of Amazon, Apple, Alphabet, Microsoft, Meta, and Nvidia, and more than five times the size of the entire global subscription software market.”

Translation: the math has to work, or the boom goes bust.

Executives argue it will work because AI cuts the biggest line item on any company’s P&L — labor. That may sound good for investors. But for families, it means layoffs.

And here’s where it hits home.

The Barron’s ran an article this week noting Americans are giving less to charity — not because they’re less generous, but because more are redirecting support to their own families. I’ve seen this firsthand with many of our clients.  

This may be the fallout of the AI boom: investors enjoy record gains, while families quietly absorb the cost of job disruption.

Just look at the market. Eight companies, all tied to AI, now account for 37% of the S&P 500. Which means your retirement account is more concentrated than ever in the outcome of this one transformational theme.

Top 10 Constituents in the S&P 500

The aftermath of what happens when the proverbial railroad is built is something only time will tell. But I have a hunch it will be really good, and really hard at the same time.

Picture your 43-year-old son, with a wife and three kids, getting a call at 9 a.m. on a Tuesday: his job is gone. He calls you, wondering if you can help bridge the gap until he lands another, they just had an unexpected healthcare expense and had to buy a new car 3 months ago, so their taxable savings are low. You’ve invested well, so you can help. But how much support is sustainable — and what does it mean for your own retirement?

AI is extraordinary. It has already reshaped society. But its ripple effects are uncertain, and the markets don’t care about families, retirement plans, or health challenges. They just move.

Here’s what I want to leave you with: AI may very well be in a bubble. The timing, the endgame — nobody knows. What we do know is that it will be different, and every family, across generations, will feel it in some way.

When clients ask me about the future, I tell them this: yes, we are investing in the transformational technology reshaping the world before our eyes. But we’re not naïve enough to think the good times will roll on at this pace forever. That’s why balance, discipline, and preparation matter more than ever.

Thanks for your time this week.

Tom