AI, AGI & What They Mean for Markets (and Us)

Artificial Intelligence (AI) and Artificial General Intelligence (AGI) are on my mind this week following Amazon’s announcement of layoffs—between 14,000 and 30,000 positions—citing “restructuring.” While the cuts aren’t directly attributed to AI, Amazon says the changes will allow more spending on its AI initiatives, including a major data center expansion for Amazon Web Services (AWS), better known as the Amazon cloud. As the second-largest U.S. employer, Amazon’s shift underscores a defining reality the AI wave is here. Its impact is already being felt, yet the outcome over the next year is uncertain and beyond that, even more so.

From an investment perspective, the U.S. stock market is, in many ways, a bet on AI. Roughly 40% of the S&P 500’s gains this year have come from just 10 AI-related stocks. The other 490 companies represent the remaining 60% of market value. Investors remain heavily concentrated in growth stocks, a trend that amplifies both risk and opportunity.

Here in San Francisco, the boom in our local economy is being driven by AI innovation. Many of the largest AI companies are headquartered here. Yet, as some may recall from the dot-com bubble, the Great Recession of 2008–09, and the COVID-19 downturn, heavy dependence on one sector—especially technology—can pose a major risk if corporate profits fail to meet expectations.

The resilience of the U.S. economy is partly due to the massive flow of capital into AI investments, but another factor is spending behavior: the top 10% of earners now account for roughly 80% of all consumer spending. Meanwhile, much of America continues to live paycheck to paycheck. Compare your own expenses this year to last—especially insurance, food, and utilities. The effects of tariffs are now feeding into inflation data, which is keeping everyday costs elevated.

This week, the Federal Reserve voted to reduce the Fed Funds rate by 0.25%. Markets largely shrugged, having already priced in the move. Investors had anticipated another rate cut at the next Fed meeting, but Chair Powell poured some cold water on that expectation. The bigger question remains: how long can America’s economic resilience hold in the face of inflation and employment pressures? Since the Great Recession, the U.S. economy has consistently outperformed the rest of the world, but the current mix of risks warrants attention.

Given all of this, there’s at least one sure bet: join us for dumplings and jazz this December to celebrate the holidays. Sometimes, the best way to process uncertainty is by stepping away from the noise and reconnecting with community.

This website is informational only and does not constitute investment advice or a solicitation. Investments and investment strategies recommended in this blog may not be suitable for all investors. SAS Financial Advisors, LLC and its members may hold positions in the securities mentioned within this newsletter. SAS Financial Advisors, LLC is not responsible for any third-party content referenced.

The SAS Newsletters are posted weekly on the SAS Blog: https://www.sasadvisors.com/blog