Key Points
Jensen Huang believes AI will kill tasks instead of jobs.
If that happens, consumers can continue to earn and spend money, which will keep the economy running smoothly.
Meanwhile, demand continues to heat up for critical AI infrastructure.
Nvidia (NASDAQ: NVDA) CEO Jensen Huang recently told Y Combinator's Startup School attendees that artificial intelligence (AI) isn't going to eliminate jobs. He said that tasks are more at risk, and this shift clears a major hurdle for the AI trade.
Bubble fears will weaken if AI doesn't replace jobs and automates various tasks instead. Here's how investors should interpret Huang's prediction.
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AI won't kill the economy if it doesn't kill jobs
One of the concerns with artificial intelligence is that the technology will become so advanced that it will replace most workers. For instance, if Alphabet's Waymo self-driving vehicles perform as well as humans, taxi and Uber drivers won't be able to find work.
Elon Musk is more bearish on that prospect and believes that universal high income via government checks will be required in the future. However, he also believes that everyone will end up with a penthouse because of AI, which is a bit of a stretch given resource distribution and other factors.
If AI creates job losses, consumer spending would drop sharply, and few people would be able to buy products and services from companies that made significant AI investments.
Huang's stance is in clear contrast to Musk's views and suggests that the economy can run more efficiently with AI without substantial job losses.
The AI trade just got safer
Killing off tasks is still a lucrative opportunity for the AI trade. People swapped horses for cars because vehicles help them reach various destinations much faster. Cars have much lower maintenance costs than horses, which made the switch cost-effective as well.
Artificial intelligence is on a similar trajectory. Cars increased travel demand, and the same has held true for airplanes. As AI reduces workloads and increases efficiency, tech giants will buy more products and services that are critical for AI infrastructure.
Huang's comments suggest there won't be a point at which job losses become so steep that they bring the economy to a halt. AI spending can then continue, since hyperscalers know that demand for these resources will continue to grow.
Musk just told investors that he will only buy Nvidia chips because "they are the best," and has committed to 10 gigawatts of AI compute by 2027. Capital is still heavily flowing into the AI trade, which suggests companies exposed to the opportunity can deliver outsize returns for long-term investors.
There are still risks with trading AI stocks, but Huang's comments should offer some reassurance about the technology's long-term economic potential.
Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Nvidia. The Motley Fool recommends Uber Technologies. The Motley Fool has a disclosure policy.