AI Threatening Jobs | Watering Down Corporate Bond ETFs to Hedge AI Impact on Economic Risks

As artificial intelligence (AI) accelerates its rollout at large enterprises, hundreds of millions of jobs worldwide could be replaced by AI. Bloomberg reports that Carson Block, founder of the short-selling firm Muddy Waters, has set up bearish bets on some large-company bond ETFs to hedge the risk of an economic downturn that AI could trigger.

In an interview, Block reaffirmed his view that AI-driven unemployment could widen credit spreads, saying companies are placing bearish options bets through funds such as BlackRock’s high-yield and investment-grade corporate bond ETFs. He revealed in March that he was building trades that short credit spreads, betting that ETFs suffering from liquidity mismatches will become mispriced.

Block said: “Artificial intelligence will change everything. In many leading companies and technical fields, the people who use AI best can already replace the work of seven colleagues.” He believes this will ultimately hit the market with an impact similar to the global financial crisis.

Block added that the market will price in this risk in advance, before large-scale layoffs related to AI actually take place. This marks a shift from his position a few months earlier, when he was optimistic about the economy and said he would rather bet on the U.S. stock market than short.