Author: The Kobeissi Letter

Compiled by: Jiahua, ChainCacther

The stock market has just wiped out $800 billion in market value, as the consensus that "AI is taking over the world" is becoming more apparent. However, this viewpoint is too obvious. And such "obvious" trades often do not win.

The doomsday narrative is favored because it touches on an intuitive fear. It does not view AI as a productivity tool, but rather as a destructive force that could trigger a macroeconomic negative feedback loop: unemployment leads to weak consumption, which in turn encourages more automation, ultimately accelerating unemployment.

It is obvious: AI is not just another software feature or enhancement in efficiency. It is a universal capability shock that impacts every white-collar workflow. Unlike any revolution in history, AI is simultaneously "getting better in every aspect."

But what if the doomsday scenario is wrong? It assumes that demand is fixed. It assumes that increases in productivity will not expand the market. It assumes that the system's adaptation speed cannot outpace the speed of the shock.

We believe the market has seriously underestimated the second path. The ominous signs of a seemingly systemic collapse triggered by Anthropic's "shock event" could ultimately open the door to the largest productivity expansion in history. Save this analysis and check back in 12 months. This projection is not a guarantee of results, but remember: humanity always adapts, and the free market always adjusts.

The Shock of Anthropic is Real

We cannot ignore the market reaction. Anthropic is disrupting various industries through Claude, resulting in Fortune 500 companies losing hundreds of billions of dollars in market value. The script for 2026 has played out multiple times: Anthropic releases a new tool → Claude significantly improves programming and automation capabilities → stocks in relevant industries plunge within hours.

Examples:

• As Claude optimizes COBOL code, IBM records its largest single-day drop since October 2000

• Due to generative capabilities compressing creative workflows, Adobe has fallen 30% year-to-date

• After the launch of "Claude Code Security," cybersecurity stocks plummeted

On February 20 at 1 PM Eastern Time, Claude announced the launch of "Claude Code Security"—an AI tool that automatically scans for code vulnerabilities. Within two trading days, CrowdStrike's market value evaporated by $20 billion.

These reactions are not irrational. The market is pricing in the risk of margin compression in real time. When AI can replicate human work, pricing power shifts to the buyer. This is a first-order effect and is very real.

But "commodification" does not equal "collapse." Technology drives growth by reducing costs and increasing accessibility. Personal computers commodified computing power, the internet commodified distribution, cloud computing commodified infrastructure, and AI is commodifying cognition.

The issue is not whether certain processes will compress margins. The question is whether reduced cognitive costs will lead to economic collapse or to large-scale expansion?

Undervalued Dynamic Demand and Incremental Markets

Pessimistic model: AI advancement → layoffs and wage declines → consumption declines → more AI investment → vicious cycle.

This assumes a static economy. History shows that when production costs fall, demand typically expands. Computers are 99.9% cheaper than they were in 1980, but we haven’t just consumed the same amount of computing power—we’ve consumed it in exponentially greater quantities.

If AI lowers costs across various industries, then even if wage growth slows, real purchasing power will rise. The pessimistic scenario only holds if AI replaces labor without expanding demand. The optimistic scenario is that cheaper productivity will create new markets.

Service Prices Will Plunge

Layoffs dominate news headlines, but a more significant event is the compression of service prices. Medical management, legal document drafting, tax filing, compliance checks, marketing production, basic programming, customer support, coaching—these services are expensive because knowledge is scarce.

As the supply of knowledge becomes abundant, the price of knowledge work will naturally decline. The service industry makes up nearly 80% of the US GDP. If operating costs decline, starting a small business becomes more manageable; with falling service prices, household participation will increase.

In many ways, AI acts like a hidden tax cut. Companies that rely on high-cost cognitive labor may face margin pressure, but the broader economy will benefit from lower service inflation and higher real purchasing power.

From "Phantom GDP" to "Abundant GDP"

The bears' logic relies on "phantom GDP," which reflects output in data but does not benefit households. The optimistic counterpoint is what we call "abundant GDP," where output growth accompanies a decline in living costs.

Abundant GDP does not require a surge in nominal income; it requires that prices decline faster than income. If AI lowers the costs of many essential services, even if wage growth slows, households can benefit in real terms. Therefore, productivity gains do not disappear but are passed on through lower prices.

Perhaps this is why, over the past 70 years, productivity growth has consistently outpaced wage growth:

The internet, electricity, mass manufacturing, and antibiotics have all provided new ways to increase output and reduce costs, even though they remain disruptive and volatile. However, looking back, these changes have permanently raised living standards.

A society that spends less time navigating systems and paying for redundancies is, in essence, more affluent.

If the rate of price decline is faster than the rate of income decline, households will become wealthier in real terms. Productivity improvements will be passed through lower prices. The internet, electricity, mass production, and antibiotics were initially seen as disruptive, but they permanently raised living standards.

The Rise of Super Individuals and the Autonomous Economy

A major concern is that AI will disproportionately affect white-collar jobs that drive discretionary consumption and housing demand. This is true and a valid concern, especially given the vast wealth gaps. However, AI faces more challenges in physical world flexibility and human identity. Skilled trades, hands-on healthcare, advanced manufacturing, and experience-driven industries still maintain structural demand. In many cases, AI complements these roles rather than replaces them.

More importantly, AI lowers the barriers to entrepreneurship. When an individual can automate financial, marketing, customer service, and programming tasks, it becomes easier to start a small business. We are optimistic about small enterprises.

In fact, removing barriers to entry through AI may be the solution to leveling the wealth gap we currently face.

The internet has eliminated some job categories but has also created entirely new ones. AI may follow a similar pattern, compressing certain white-collar functions while expanding autonomous economic activities in other areas.

SaaS Has Not Perished

AI clearly pressures traditional SaaS business models. Procurement teams find negotiations more challenging, and some long-tail software products face structural headwinds. But SaaS is a delivery mechanism, not the endpoint of value creation.

Next-generation software will be adaptive, agent-driven, outcome-oriented, and deeply integrated. Winners will no longer be static tool providers but those businesses that can best adapt to changes.

Every technological evolution reshapes the tech landscape; companies that price static workflows will inevitably struggle. Those with data, trust, computing power, energy, and validation capabilities are expected to thrive.

The compression of margins in one area does not signal the collapse of the entire digital economy. It marks a transformation.

AI Will Restructure Business Models

The bear narrative suggests that agent-based commerce will destroy intermediaries and eliminate fees. To some extent, this is true. As friction decreases, extracting fees becomes more challenging.

As shown, the trading volume of stablecoins has exploded, even before AI reached its current state. Why? Because the market always favors efficiency.

Lower systemic friction will also expand trading volumes. When price discovery improves and transaction costs decline, more economic activity occurs. This is an optimistic trend.

Agents acting on behalf of consumers may compress the margins of platforms built on user habits. However, they can simultaneously increase overall demand by lowering search costs and enhancing efficiency.

Productivity is the Key Variable

The ultimate determinant of optimistic outcomes is productivity. If AI can deliver sustained productivity growth in healthcare, government administration, logistics, manufacturing, and energy optimization, then the outcome will undoubtedly be extreme abundance and a significant improvement in resource access for everyone.

Even a continued incremental productivity increase of just 1-2% over a decade would yield astounding compounding effects.

The transformation we currently observe in the macroeconomy, driven by AI, is already cultivating some of the best investment opportunities in history. For this, we have invested countless hours and remain committed to staying at the forefront. If you are interested in obtaining our advanced analysis reports and learning about our investment landscape during this disruptive period, please visit thekobeissiletter.com for more research content.

As shown, productivity has started to grow rapidly due to AI. In the third quarter of 2025, US labor productivity accelerated to the fastest growth in two years:

The pessimistic view suggests that productivity gains entirely belong to those building AI models and will not translate into broader benefits. The optimistic view holds that price compression and the formation of new markets will spread these gains more widely.

Prosperous Productivity Will Reduce Conflict

One of the least discussed impacts of AI-driven abundance is on a geopolitical level. Throughout most of modern history, wars have erupted over scarce resources: energy, food, trade routes, industrial capacity, labor, and technology. When resources are limited and growth feels like a zero-sum game, nations compete against each other. But abundance changes everything.

If AI significantly lowers production costs in areas like energy, manufacturing design, logistics, and services, the overall global pie will grow larger. When productivity rises and marginal costs fall, economic growth will no longer rely on gaining advantages over others. This would end wars and could usher in the most peaceful period in human history.

The same applies to economic wars, such as the trade war we are currently entangled in for over a year.

In a world where domestic industries struggle to compete on cost, tariffs become protection tools. But if AI significantly reduces production costs worldwide, why would we still need tariffs? In a highly abundant environment, protectionism will become economically inefficient.

History shows that periods of technological acceleration tend to reduce global conflicts in the long run. The industrial expansion following World War II reduced the incentives for direct confrontation between great powers.

What if the World Does Not End?

AI will magnify outcomes. If institutions fail to adapt, it will amplify vulnerabilities; if productivity improvements exceed disruptive destruction, it will magnify prosperity.

The crash triggered by Anthropic is a signal that workflows are being repriced and cognitive labor is becoming increasingly cheaper, which is a clear transformation.

But transformation does not equate to collapse, as every major technological revolution initially appears to be destructive.

The most underappreciated macro outcome is not dystopia, but comprehensive prosperity following a leap in productivity.

AI may compress rents, reduce friction, and reorganize the labor market, but it may also bring about the largest real productivity expansion in modern history.

The distinction between a "global intelligence crisis" and "global intelligence prosperity" is not in capability but in adaptability.

And the world always finds ways to adapt.

In the end, those who can remain objective and follow processes during this disruptive period are entering the best trading environment ever.

An objective and systematic approach is precisely why we have outperformed market benchmarks. As shown, since 2020, our investment strategy's return rate has been nearly five times that of the S&P 500 index.

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