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['m not doing my friends. I'm just trying to save you some money. My job is not just entertain, but to put things into context and do some educating. So, call me 1-800-743-5782 and tweet me at Jim Cramer. Today, we got a glimpse of an ugly future where we run out of white-collar jobs because artificial intelligence destroys employment as we know it.
That's the principal reason why the Dow plunged 822 points. S&P dropped 1.04% and Nasdaq tumbled 1.13%. The consumer staples soared because they're textbook recession stocks that are winners in a jobless world. You buy them whether you want to buy the product whether you like them or not. Frankly, I don't believe that AI will wipe out the white-collar workforce.
Let me give it to you straight though because I don't think the narrative you're going to hear about today is going away. I think it will hurt the price-to-earnings multiples, what we pay for a host of stocks causing them to drop without seeming, well, let's say anything being wrong. See, yesterday an Apple called Citrini Research and Alop Shah, two sources I never heard of until today, frankly, put out a stunning, well-written, incredibly pessimistic paper called the 2020-2028 Global Intelligence Crisis.
The piece starts with a provocative question. What if our AI bullishness continues to be right? And what if that's actually bearish? Very interesting. I got it. Just drew me right in. What follows is a dystopian tale set in 2028 of incredibly high unemployment and incredibly low consumer spending because the robots will replace us.
Apparently, humans are nothing but friction. As AI gets better and better, more and more white-collar jobs will disappear. Basically, they're predicting that most of the middle class will cease to exist. Today's stock market decline, it reflected the thesis embodied in this work of science fiction. The worst hit were software stocks, which according to the 2028 Global Intelligence Crisis will be all but destroyed by AI that can write code better than they can.
This paper argues that software companies will eventually be forced to lay off tons of workers, and the companies instead will invest their savings in AI tools that can be used to maintain their output with dramatically lower costs. And according to these guys, software's only the opening act. The housing complex, banking, retail will all be laid to waste by this white-collar crunch as the good jobs disappear.
The private equity firms that bought most of the companies that that have been taken private in technology, well, they're going to go under, perhaps causing a credit crunch. Unemployment skyrockets. The world as we know it collapses. It does everything but quote Billy's famous line from near the end of Predator.
We're all going to die. And the stock market today took it seriously. Today we saw one of the more one more pummeling of the enterprise software stocks that we used to know and love, Salesforce, Workday, Adobe, and their athletes along with ServiceNow. For some reason, the paper really zooms in on ServiceNow, and it is not optimistic.
It talks about how all these companies will no longer be able to charge what they used to because too many of their clients will be able to develop software in-house using AI instead of settling for, let's say, 4-year contracts with 5% price increases. Now they're going to balk, maybe ask for 2 years at no price increase to be sure that they are ready to move to Anthropic if it Claude has a competitive cheaper product.
Oddly, the paper didn't spend time outlining the destruction of cybersecurity stocks. The market took care of that itself as CrowdStrike and Palo Alto Networks fell for a second day. Truly hideous declines caused by a press release from Anthropic. They said they're moving into cybersecurity and that was what That was enough to just to crush the whole group.
I'm going to have more on that later. But for now, I need to say that this vision of global intelligence crisis that destroys the the economy I don't know. It's I think it's a reach. This great reminds me of a piece of research during the initial GOP dash one craze where an analyst was recommending buying the airline stocks cuz people will all weigh less and save the airlines a lot of money on fuel.
Listen, I've been a big believer in AI, you know that, which is why I believe in the pioneers of AI. I believe in Jensen Huang, the CEO of Nvidia. They report this week. He talks about how traditional software won't be destroyed. It just gets smarter. The new technology will create new jobs that we haven't even thought of yet.
It's the fourth industrial revolution everyone's saying. And like the previous ones, it'll create a lot more jobs than it destroys. I remember when computers erased a lot of white-collar jobs in the '90s, but the computer ended up being a great spur for the economy. These two individuals in the paper, well, the company in the paper, they think that that's not going to happen.
They just think jobs are going to be destroyed and nothing else. But, you know what? Not that long ago, everybody was wringing their hands about falling birth rates in this country, but well, also in worldwide. The fertility rate has fallen to a historically low rate of 1.6 in the country. You need an average of 2.1 children per woman just to maintain a steady population.
Heck, remember the labor shortages we came out of the pandemic? With the huge decline in immigration, we may need all the help we can get from AI automation. We're running out of workers. I thought that was the thesis. Besides, I think the 2028 timeline for this is way, way too quick. Artificial intelligence can't wreck the entire software industry in the next two years, but there's one real problem here.
The whole thesis calls into question what price-to-earnings multiples we should pay for tech and for other stocks. Ultimately, the rest of the service economy, which is 2/3 of the total economy, may be under attack. Yeah, but as I explained in How to Make Money in Any Market, the multiple is the secret sauce.
It shows what we'll pay for future earnings. The problem that most stocks in the service economy and the tech economy trade at relatively high multiples, and people simply aren't willing to pay as much for them with these AI apocalypse fears floating around. The multiples are too high. We see it in Salesforce reports this week.
This company, formerly the king of the enterprise software stocks, which has kept pace with AI by creating its own AI agents, that's good, has lost 33% of its value since the beginning of the year, that's bad. It sells for less than 15 times this year's earnings estimates, that's good, a ridiculously low amount for growth stock.
But, when Salesforce reports on Wednesday, we will see numbers that reflect the damage in its core software-as-a-service business, where clients pay per user. I'm worried about that. With AI making each user more efficient, the thinking is there could be a real problem here, even if it hasn't shown up yet.
How do we Oh, we need to ask how much of the labor expenses were in stock-based compensation, which makes the stock look cheaper than it is. And then there's the private equity companies like Blue Owl, which you'll hear about more later. Blue Owl, like many of the Oak has been restricting withdrawals from some of its funds.
They'll give you some money right now, but you can't pull the entirety of your investment out. Who knows what multiple should be put on them? I'm not a buyer of anything they have to offer. What multiple do you put on banks knowing that if this Saturn V document comes true, their earnings are going to go down big, especially the credit-related companies?
Today, the money is piled into the staples and the healthcare companies. Can that go on forever? I think we need to be more cautious about all stocks because the market was just too easy to take down today. There are There're many worries about the power of Anthropic and OpenAI. There're too many worries about the weakness in Blue Owl.
Too many worries about a fictitious version of 2028. But I got to tell you, I'm a warrior. Here's the bottom line. There's just too many things that can go wrong if we buy the wrong stocks. Don't I know it. We own some of the wrong stocks for my charitable trust. We've made some sales, but I can't help but grow more pessimistic as you'll hear on the at the Friday meeting that we have, when I see how easily a piece of science fiction can crush the market as if it's science fact.
It's a way more difficult market than many of you think. Let's be more cautious. We have to be after what we saw today. Let's go to Leo in Texas, please. Leo. Hey Jim. Hey Leo, what's up? last two weeks. Welcome back. Thank you. Thank you. I I at least got on the morning show a little bit, but yeah, thank you.
So my question concerns GE Vernova. I currently hold a position in in in that stock and I'm wondering what your take is on whether this stock has room to run still. It's a little bit Well, GE Vernova is presuming with that price earnings multiple that will continue to build power plants, that will build nuclear power plants, that will need more energy.
It's probably the single most stock that's most positioned for us to need more energy in the country. So I've got to say I still like it. Big position for the travel trust. In this market it seems like there's just too many things that can go wrong now and we're paying too high a price earnings multiple for many stocks.
We got to get tonight. Every time an AI company releases a new feature, it seems it it takes the whole cohort and the market down with it. I'm serving the pain of host of sectors and sharing how I think this will check out. Then in recent months we've heard a bunch of concerns about private credit. I'm sharing with you what's going on and what the potential ramifications could be for you.
And BWS Technologies put out the bell. I'm getting a read on where our country stands in the pursuit for nuclear power with the CEO. ]
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