Fundstrat’s Tom Lee warned AI is destroying the $450 billion software sector and job losses will follow, predicting a dovish Fed under Kevin Warsh will cut rates as core CPI is forecasted to drop in Friday’s data release.
The AI Job Destruction Warning
Lee told CNBC on Thursday that AI is “wreaking havoc across software” and job losses are “soon to follow.”
Software companies, which once “ate the world,” now face existential threat from AI displacement.
“If software shrinks, that’s deflation,” Lee said.
The inflation picture shows AI is “actually disinflationary” as core CPI year-over-year is projected to drop to 2.52% in Friday’s January report—matching the 2017-2019 average and signaling a return to pre-COVID inflation.
Fed Chair Jerome Powell already subtracts 65,000 monthly from jobs reports knowing revisions are negative.
Lee argued the stock market won’t care about labor reports because investors wonder “how much of these are gonna be lost in the future due to AI.”
The Warsh Dovish Bet
Markets initially treated Kevin Warsh’s Fed nomination as hawkish, but Lee called that reaction wrong.
“Trump wouldn’t appoint a hawk,” he said. Warsh wants lower rates but a smaller balance sheet.
With jobs shrinking and …