Markets lately look like a protest march against AI, a coalition of people who agree on very little beyond the thing they are marching against.

The pacifist walks beside the man with the pitchfork. Some came for the cause, some for the spectacle and a few only because the march happened to pass their door. The chant is the same. The reasons behind it could hardly be further apart.

Marches end. The crowd goes home. What remains is the damage and the question of what comes next. That question depends on which burning issues get picked up for servicing. As of now, we deal with the slogans that fit placards. The genuine reasons fill a library. The march is a ladder of gloom. To know what survives requires an attempt to parse the pessimism.

The ladder starts with those who see gloom in whatever happens. It ends with those who see gloom in anything that keeps money away from what they already hold. In between come those who think AI does nothing and those who think it does too much.

Then come the worriers over jobs, cyberattacks and power lines, the auditors of spending and of egos, and two quieter breeds of market bear: those who doubt the profits and those who doubt the prices.

The stakes are real. In their zeal, pessimists could push the US into outsourcing its compute, the way it once outsourced manufacturing and then software development. That road ends with the frontier in other hands and another Sputnik moment. Much of the gloom rests on bad data, fast-moving data, and numbers hallucinated by accident or on purpose.

That does not make the fear harmless. Fear needs no accuracy to move markets. In an era this dependent on confidence, its effect on mood, financing, and prices can be enormous, whatever started it. Parsing pessimism, camp by camp, is the only way to tell the dangers apart.

Once again, during the march, like right now through the gyrations of financial markets, these differences are hard to see. Afterward, which fears prevail decides the course ahead, with its own unique set of opportunities and threats.

In the write-up below, each camp gets a short description, then advice for three audiences. The Waverers are pessimists, but with an open mind, so they get a list of what to watch. Optimists get what the camp should teach them and the signals they cannot afford to ignore.

The Devotees need no further data or evidence. They get a harder question: how to stay in the marketplace, and what their own scenario would mean for the economy if it came true. Before joining the march, it helps to know which future the banner is asking for.

Doom collectors

The Camp. Some pessimists have been waiting for World War III since before the Berlin Wall fell. They have warned about government debt-to-GDP and financial repression for three decades. Now the collection has a fresh piece: AI ending humanity. Every path they examine ends in a vicious cycle.

Every short-term fix only stores up longer-term pain. If they expect bond yields to reach 5.5%, they will happily add that 5.5% solves nothing, so 6.5% must follow, then 8.5% or 20.5%. Ask them to find a single hopeful route through their interlinked gloom. They struggle in earnest. Some hold portfolios that match their forecasts, including a bunker.

The Waverers’ Watch. There is little to watch. Their arguments are time-invariant and event-invariant. If doom has not arrived today, it will only be more brutal when it does. No data point can confirm the thesis early or refute it late. With no date attached, the forecast becomes a hobby wearing the costume of a prediction.

The Optimists’ Watch. Optimists can trim a position or two if signs of the end appear. Beyond that, the scenario sets them no useful homework. If hellfire is coming to burn everything, no asset, country, or bunker will offer shelter.

The Devotees’ Path. Logic says the true believer should pray for delay. Every year the fire holds off is one more year of ordinary life, which their own thesis says is the best they can get. Yet most in this camp seem to want the show to start at once, on the grounds that anything later will only hurt more.

Of all the camps in this essay, it is the only one whose happiest ending is the worst one for everyone, its members included.

Parrot purists

The Camp. For them, the technology has no utility, or so little that the difference hardly matters. It is a statistical parrot repeating what it has read, with no new intelligence anywhere. They may accept every ROI argument higher up the chain, for chipmakers, memory makers, and cloud operators. None of it survives at the final user. The company or household paying the bill gets a higher cost and no return. In their eyes, the industry is selling lemons, pure and simple.

The Waverers’ Watch. The waverer should keep a tally of the moments that jar. Work across codebases running to millions of lines counts. So do tasks that once took whole teams and now take an afternoon. Buyers who taste the lemon and then order a crate count most of all. Plenty of people, ourselves included, find genuine utility in almost every dollar spent on AI. Some keep raising that spending at the cost of everything else in their budgets. The real exercise is to multiply such users across hundreds of millions of people and companies worldwide. The total may or may not justify the buildout. It should at least retire the claim that end users find nothing of value.

The Optimists’ Watch. The optimist’s real work is steady observation, statistical and anecdotal, of whether people keep taking AI into new tasks. Today that means agents handling multi-step work. Tomorrow it should mean the physical world. The question is whether the range of uses keeps widening or starts to stall. Anecdotes can glow while the aggregate sags. The aggregate is the test that counts.

The Devotees’ Path. Suppose the purist is entirely right: AI spending is digging holes and filling them up again. The money still pays engineers, electricians, and builders. It still lays power lines and fiber. It comes from the most concentrated pools of wealth and cash in the world, at a time when many governments have little room left to spend.

Useless activity funded by idle fortunes is an old Keynesian remedy. Its removal would leave a hole of its own. Wishing it away means idling the busiest construction crew on earth and getting nothing in its place.

Off-switch brigade

The Camp. The Parrot Purists have an exact mirror image. The two camps rarely seem to notice each other. Both are sure the shares should fall. For the Brigade, AI does far too much. Models improve with every release. AGI may have arrived. Progress runs at double speed. If one Navier-Stokes-class problem falls today, a dozen will fall tomorrow. Humanity is handing its decisions to machines whose reasoning it cannot follow and may never comprehend. The only sane response is to throttle the technology before it outruns us.

The Waverers’ Watch. The waverer should track what the new intelligence actually does with its power. Calculators did things beyond human ability, too. The same test applies to drug discovery, scientific research, and the administrative and economic grind of daily life. Each case where superhuman ability turns into human benefit is a small argument against the off-switch.

The Optimists’ Watch. For optimists, this camp matters through regulations. A growing public sense that AI works beyond human comprehension can sit alongside excellent business results. This is likely to be a perpetual watch, though, as the topic is unlikely to ever vanish from economic and political arguments from here on, as we explained in this article months ago.

The Devotees’ Path. The fully convinced should join every protest and every forum on AI control. They should also face the practical arithmetic we laid out in Speaking Plainly. Rules take years to write. Competitors rarely sign up. Any policy worth backing has to survive a map. A country that pauses alone will hear about the next breakthrough from someone else’s laboratory.

Pink slip prophets

The Camp. After the two extremes come the practical in-betweeners. Whether AI is a parrot or a coming superintelligence matters less. It is already pushing people around. Whole professions are under pressure. In this camp’s view, no policy ends the story. Universal basic income, retraining schemes, and every other remedy will, at best, change the shape of the problem. Displacement has joined the political and economic conversation for good.

The Waverers’ Watch. Some of the displacement is already visible, so the useful work lies in splitting it. Where governments try to restrict displacement, the waverer should check whether those policies have any genuine effect, whether the damage keeps growing anyway, and what else follows from it.

The Optimists’ Watch. Optimists cannot afford to treat the social side of AI as background noise. The arguments will keep changing form. Because AI touches almost everything we do, policy events around it will only multiply in the coming years. An optimist who models the technology carefully and the politics lazily is holding half a thesis. The signal that should give an optimist pause is a backlash strong enough to slow adoption itself.

The Devotees’ Path. For the fully convinced, the first question is whether the fear of displacement, and whatever policy it provokes, will actually slow AI down. If it will, what they do in policy recommendations or their own financial investments will differ from the countercase. Displacement that is real and beyond the reach of any regulator calls for adjustments in daily life: in skills, in careers, in what children study, and in how savings are held. The aim is to shield what one holds dear, because the law moves slower than the layoff.

Firewall fretters

The Camp. The Fretters worry about a single bad weekend. Cyberattacks are rising quietly, week after week. Those who follow them closely see the world drifting toward a breach large enough to cause real chaos. One such event could change overnight what societies decide to control and how. Unlike the Doom Collectors, the Fretters have a specific fear with a specific trigger. They just cannot name the date.

The Waverers’ Watch. The waverer should notice who is best placed to stop the breach. Fighting AI increasingly takes AI. Defenders without the latest tools are already outgunned. At least once this year, limits meant to keep powerful models from attackers also kept them from defenders at the worst moment, while the attackers faced no limits at all. Rising attacks may lift demand for AI more than they dent it. The same tools are also shrinking the scope of older software and slower technology innovators.

The Optimists’ Watch. Optimists should expect every major incident to bring more talk of regulation and more controls, including the risk of arbitrary shackles after a massive event.

The Devotees’ Path. The fully convinced should follow that belief to its target. A major event would likely hurt ordinary life far more than the technology companies themselves. Banks, hospitals, utilities, and logistics run on old systems with thin defenses. The sharpest repricing could hit traditional sectors and whole economies through a sudden rise in their risk premium. The Fretter who sells AI stocks to prepare may be hedging the wrong half of the portfolio.

Spreadsheet scolds

The Camp. The Scolds concede that AI works. Their quarrel is with the arithmetic. Hundreds of billions go into chips, buildings, and power every year, while revenue from AI services remains a fraction. Hardware loses value fast. Cash piles shrink. The marginal builders borrow from private credit funds and through special vehicles. The camp’s cousin draws circles on the revenue chart: money looping among the same few firms. We took that claim apart in an earlier essay. The Scolds will disagree with almost everything there.

The Waverers’ Watch. The waverer should judge the spending the way an owner would, across an asset’s working life: what customers pay, what running it costs, and what replacement will demand. A single year’s AI revenue set against a single year’s spending says little about either. Much of the payoff also hides inside older businesses, in sharper advertising, better search, and cheaper internal work. Lately, the chip and memory makers collecting the cash have been putting it back into owning and leasing hardware themselves. The circle drawers will file that under circularity. A landlord buying more buildings while the waiting list grows is the plainer reading.

The Optimists’ Watch. Optimists should watch where the leverage sits. The largest operators will not pause their buildout over the free cash flow line unless the leverage ratios become too high for comfort. The weak links are elsewhere: smaller cloud operators, developers with land and power but little experience, and lenders who priced the risk for a world without delays. Spreads, covenants, and refinancing terms at these names will crack long before anything at the giants does. A fully booked machine can still earn too little for the price paid to own it.

The Devotees’ Path. Suppose the return never comes. The Purists’ consolation applies here with more force, since the spending still built grids, fabs, and skills. The sharper question is who bears the loss. Most of it would land on shareholders of cash-rich companies. Private credit funds would take the next share. Their investors signed up for exactly this risk. That is capitalism doing its job. The exposure of deposit-taking banks, by all accounts, appears small. That leaves little room for the kind of systemic contagion seen in earlier financial crises. The believer’s real watch is whether that ever changes.

Ego auditors

The Camp. The Scolds blame the arithmetic. This camp has found a culprit. It sits in a boardroom. In its telling, data center spending is decided by a handful of hyperscalers and neocloud operators, funded by greater-fool-believing parts of financial markets and fueled by ego. Every profit at the chip and memory makers hangs on those few signatures. The camp rarely looks past them to the people actually using AI. The story rarely addresses how much of the spending rests on real consumption by companies and households. When financial stress gets called the next choke point, this confusion is usually where it starts.

The Waverers’ Watch. The waverer should separate the layers of decision. Users come first. Whatever surveys or outsiders say about them, hundreds of millions of people and companies now use AI. That number keeps growing in everything we track. Watching that demand matters more than second-guessing the intermediaries. A hyperscaler can misread demand for a while. If the demand is real and supply is short, the intermediaries will have genuine reasons to continue doing what they have been doing.

The Optimists’ Watch. Optimists should remember that a cycle needs no oversupply. Fear alone can freeze financial markets. A freeze can force a downturn, whatever the eventual demand. Strong demand may only keep it shallow. Spending cuts announced while usage is still climbing would be the sign that this kind of cycle has arrived.

The Devotees’ Path. Those convinced that everything hinges on a few big spenders will want them restrained by regulators or by shareholders demanding discipline. They should consider who fills the space. Competitors are not standing still. A rival with a patient owner, or with a state as its owner, will happily take the share a disciplined company gives up. The technology’s potential is understood everywhere now. Throttling one country’s spenders hands the field to companies and countries that face no such brakes.

Grid NIMBYs

The Camp. From the boardroom, the argument moves to the neighborhood. The NIMBYs accept that AI works and that people want it. They simply want it built somewhere else. Theirs is NIMBYism with a power cord. For them, local electricity bills climb, impacting the cost of living, because of data centers. For some, there are other environmental concerns. The most committed NIMBYs oppose the buildout everywhere, from the county next door to the plans for data centers in orbit.

The Waverers’ Watch. The waverer should track where the blocked capacity goes. Data centers are less rooted than factories. Governments in Central Asia, the Middle East, and North Asia are eager to take the load, often with cheap power, fast permits, and land already cleared. Every project refused at home is one someone else can approve within months. The real question is how much of the work can travel, and how quickly the receiving countries can switch it on. The local fight may be won while the global buildout carries on unbothered.

The Optimists’ Watch. Optimists should note what the NIMBYs rarely mention. Demand has never been part of their argument. New hardware fills up almost as soon as it is switched on. The real risk lies in the timing. A data center canceled in one country takes years to reappear in another. In the gap, markets may read every cancellation as proof of a slowdown. Optimists should watch the extent of any displacements against the ongoing work to estimate the true demand and supply balance at other choke points.

The Devotees’ Path. Suppose the NIMBYs win everywhere. Demand keeps climbing while supply stays stuck behind choke points that were already tight. The shortage would show up as a new kind of inflation: rationed model access, rising compute prices, and waiting lists for intelligence. Public opinion would then turn. Sustainable investing went from virtue to villain within a few years. A shortage of AI could flip the mood on data centers even faster.

Assumption artists

The Camp. Some pessimists need no single thesis. They live off the fog. How many data centers will be built, when, where, and which of them can move? How short is memory? How tight is packaging? How much efficiency will the next model or chip squeeze out? Who will finance any of it? Nobody knows, which suits this camp perfectly. Every gap becomes a number. Every number becomes a scare. We hear that most of the world’s tokens are paid for with borrowed money, sometimes more than 90% of them. We hear that a credit freeze would shrink the buildout to a tenth of its plans. Neither figure comes with a source. The numbers change daily. The fear stays constant.

The Waverers’ Watch. The waverer should doubt every data point. The more frightening a claim, the more checks they need. Most are invalid or unprovable in a world where nobody can arrive at what data center capacity is planned or should be expected in the US next year, with the bottom-up ranges varying by over 100%. The rest move too fast to hold.

The Optimists’ Watch. Optimists need one tool: the choke point ladder. The buildout runs through many choke points at once. The tightest sets the pace for all the others. Without a doubt, they will also suffer from a lack of forward-looking data, but there could be a lot in the actual information on prices, plans, and buyer-seller contracts without the aggregates for what is coming next.

The Devotees’ Path. Those certain that everything is imbalanced will be right about one or the other bad outcome. Knowing what kind of imbalance could still be important, as long as they are not a Doomer discussed in the first section. That could be the reason for them to verify the data they come across.

Good-enough gang

The Camp. The scaling-law pessimists have mostly gone quiet. Two years of models that refused to plateau saw to that. Their heirs have moved the argument from the lab to the desk. The models may keep getting smarter, they concede, but nobody needs them to. Most companies cannot absorb what last year’s models already offer. Change is outrunning the people meant to use it. Demand for frontier intelligence will saturate. Model makers will then grind each other down on price.

The Waverers’ Watch. The waverer should look at what actually happens to old models. We covered this in the section titled “Nobody Sells iPhone 3 Currently” in The World of Zero Visibility. Models are retired almost as fast as new ones arrive. Whether last year’s model was good enough is beside the point. Newer models, open or closed, take most of the use and most of the compute. How intensely they are used sets total demand. A retired model, frozen on old information and old methods, may linger in some corner. It barely moves the overall compute bill.

The Optimists’ Watch. Optimists should track whether model makers keep finding new products, services, and methods. If the newest models end up confined to exotic applications, saturation will reshape what model makers sell. Demand would feel it, though not at once. The opposite can happen just as fast. The agentic tools launched in the past two months show how a single new use can send demand for the latest sharply higher, the way it has been happening with smartphones. As of now, the replacement cycle remains short, but it may not forever.

The Devotees’ Path. Those fully convinced that smarter models are unnecessary should ask who wins in their world. Cheap, open, often years-old models would gain the upper hand. That matters well beyond hardware. Much of the open-source frontier comes from makers some governments would rather keep out. A world settling for good enough would run increasingly on their models and dated technologies, with economic and geopolitical consequences the Gang rarely prices in.

Profit pallbearers

The Camp. The Pallbearers are half convinced. On today’s numbers, many AI stocks look like some of the best value in the market. They simply refuse to trust the numbers. The E in the P/E is borrowed from a cycle that can turn overnight. If capacity runs ahead of demand, earnings collapse and take the bargain with them.

The Waverers’ Watch. The waverer should start with the choke point ladder. Many choke points are tight enough to keep supply short even if a good share of planned data centers is canceled or delayed. This year’s shortages came with a smaller buildout than next year’s. Corporate behavior matters even more. Companies that have tasted pricing power rarely give it away. Software makers have held their prices for years with no capacity limit at all. Hardware makers are unlikely to slash theirs because demand dips a little.

The Optimists’ Watch. Optimists should read the ladder from the other side. A tighter rung upstream can tip the next segment into oversupply almost overnight.

The Devotees’ Path. Those certain the cycle will turn should ask what is still a commodity. We have written increasingly about markets once treated as interchangeable that no longer are. Memory made to one customer’s design behaves less like a commodity every year. Commodity cycles punish commodities. The devoted pessimist should track where commoditization has stopped, because the old cycle may never return there.

Gravity faithful

The Camp. The Pallbearers at least look at earnings. The Faithful do not bother. For them, a sector that has grown far more important than the rest of the market deserves to shrink back, whatever its ratios say. They see risks gathering in bond markets, geopolitics, politics, and policy. When markets finally price those risks, the sector that rose the most is expected to fall the most. In this decade, that sector is AI.

The Waverers’ Watch. The waverer should ask whether the rule is really that simple. When markets correct, do the biggest risers always fall the furthest, or do events and growth still separate winners from losers? The real test lies outside the volatile weeks. Over one, three or five years, does a stock’s next move depend on its last one, or on the growth it delivers?

The Optimists’ Watch. Optimists should concede that the Faithful tend to be right in the short run. In almost every correction of recent years, whether from a tariff announcement, a new war, or a bond scare, the highest-momentum sectors took the hardest hit. That is the perpetual watch for anyone who owns them.

The Devotees’ Path. Those expecting a major correction from outside events, with AI merely standing in the way, should think about where to hide. Real estate, bonds, and other assets would be under pressure too. In a world of high inflation, even cash offers poor shelter. The Faithful may be right about the fall and still find nothing worth holding on the way down.

Reallocation lobby

The Camp. The last camp cares least about AI itself. Its members hold something else dear: a portfolio built elsewhere, a business that AI has pushed out of the spotlight, or a career that predates the new intelligence. For those things to win back the attention they believe they deserve, AI has to stumble. The reason hardly matters. This month it is circularity, next month regulation, the month after that hype. Any argument will do, as long as AI ends up looking shoddy or fraudulent. The argument is rented. The position is owned.

The Waverers’ Watch. Unlike the Doom Collectors, these pessimists aim their gloom at a single target. One question matters most: if AI does fall over, does the money actually move to what they hold? An AI selloff makes no promise to benefit everything it leaves behind, even if reallocation briefly brings mean reversion and absolute gains simultaneously for the beneficiaries. Money leaving one trade still needs a reason to enter the next. A fire in the market’s busiest factory rarely leaves the rest of the street untouched.

The Optimists’ Watch. For optimists, this camp matters because it adds weight to all the others. When the Lobby joins the Purists, the Scolds, the Brigade, and the rest, their combined force can turn the market mood. A turn in mood brings the cyclical risk the Ego Auditors and Pallbearers describe. It also feeds the fog the Assumption Artists live on. Our portfolios give us an interest in this argument too. Resentment deserves the same inspection as enthusiasm.

The Devotees’ Path. Those who need AI to fail, with or without a reason, should picture what victory looks like. Even in the bad case, the relative winners may still sit inside innovation, as the cyclical weakness could accelerate rather than slow down many displacements discussed above.

Parsing pessimism

In recent weeks, we have sat through many conversations about AI that went nowhere. One worry comes up. Before anyone can make a claim or a counterclaim, the talk has moved to another worry, then another. The polite listeners who do not argue back have usually moved on in their heads as well. Nothing gets weighed. Nothing gets settled.

Read the list above in one sitting and the worries seem endless, so many that it hardly matters which one keeps a person awake. Look closer. Many of them work at cross purposes. The Purists cancel the Brigade.

If the NIMBYs win, the Pallbearers’ glut never arrives. Pessimism does not add up in a single column. Between the data fog and arguments flying in every direction, most of us in a fearful market cannot say exactly what we fear. Parsing pessimism is the only way to think about risk systematically.

Most of us belong to more than one camp, at least in part. Optimists like us are no exception. A forecast can retire without taking its author with it. The moving parts are real. Memory looks short at today’s pace of construction, and shorter still if next year’s building grows even modestly. That holds only if the building does not fall sharply. A deep enough downturn would turn the choke point ladder. Today’s scarcity could then vanish within months.

That is why fear matters, whatever its source. This is something we wrote about in our previous article analyzing risks: the immense need for optimism for the innovation segment that is now capex-heavy.

If the mood turns dark enough, the tightest chokepoint becomes people declining to make decisions. Power, memory, and funding all queue behind it. Capital spending and innovation both run on optimism. Once it drains away, outcomes follow that no simple supply-and-demand model could forecast.

Meanwhile, innovation keeps going. Had markets not demanded this essay, there was plenty else to write about. This week, an outside assessment with rare internal access found Anthropic’s pace of progress roughly doubling, mostly because its researchers now work alongside their own models.

In the same week, OpenAI described its models finding and reproducing flaws across the Linux kernel at a pace few security teams could match. The new intelligence works relentlessly. The cost of trying a new idea falls by the month.

Read the camps side by side. One pattern keeps returning. In nearly every case, opting out costs the defector far more than it costs the system. Those expecting a return to investing in companies that sell a little more of the same each year are underestimating the forces now in motion.

A country can opt out of the race. Races have a way of finishing anyway. A company can retreat. A market can rotate for a while. Innovation may slow. It will not stop. The marchers will go home. The builders are staying. That new intelligence, the one that got built last month, is working on converting text to proteins.

Nilesh Jasani is the founder and CEO of GenInnov Pte Ltd, Singapore. Originally published by GenInnov, this article is republished with permission.