Your 401(k) is probably invested in AI

Kai Rizdal opens by looking ahead to the Federal Reserve’s meeting the following week and asks why officials have stopped saying they are “looking through” the inflation spike and energy shock. Cedeep Reddy says the Fed faces a difficult puzzle: the war in the Middle East has lasted nearly eight months, far longer than many expected, and officials must now consider the possibility that it could reach a year. Rising oil prices would push inflation higher, but they could also restrain growth by reducing consumers’ purchasing power and creating damaging knock-on effects across the economy. Reddy says the risks could reverse quickly. A renewed U.S. bombing campaign, threatened attacks on Middle Eastern oil infrastructure, or a “spectacular inflationary event” could initially raise prices but eventually destroy enough economic activity to become deflationary. The Fed therefore risks “fighting yesterday’s war” if it responds only to the inflationary side. Its challenge is to remain alert to inflationary and deflationary pressures simultaneously, while the next PCE inflation report will arrive one day after its meeting.

Kai asks Jordan Holman what happens when consumers finally stop absorbing higher prices and say they have no money left to spend. Holman says that outcome has been predicted for roughly four years, yet consumer spending has continued to hold up despite consumer sentiment being “in the toilet.” CEOs of consumer-facing companies have relied on the fact that they still see strong sales and little weakness. If consumers really did throw up their hands, Holman says the effects would spread throughout the economy and companies would need a different business plan. Kai clarifies that the spending strength is concentrated among roughly the top 20% of households by income. Holman agrees, pointing to strong stock portfolios and the resulting wealth effect: people with substantial market gains continue to spend even when fuel, flights, and other costs rise. The conversation then turns to artificial-intelligence stocks. Reddy says AI will produce some genuine productivity gains and may restrain hiring and wages, especially for younger workers, but there is also obvious overinvestment. The market’s largest technology companies are echoing 1999 and 2000, and Reddy warns that AI-generated cyberattacks could further damage investor confidence.

Kai highlights an interview Holman conducted with Scott Kirby, the CEO of United Airlines, about the perceived disconnect between CEOs and the broader economy. After spending about an hour with Kirby, Holman asked whether he understood how people viewed corporate executives. Kirby responded that he considered himself a good person, but then made an unusually forceful policy argument: he called for a 100% wealth tax on wealthy people because inequality in the United States had reached a dangerous level. Kirby did not present himself as the person who would implement such a policy. Instead, he said policymakers needed to act. Kai treats the position as evidence that concern over inequality is not limited to critics of business or to people outside corporate leadership. The segment closes with the hosts noting that companies are still benefiting from spending by wealthy consumers, even as many other households are scraping together their money and becoming increasingly cautious.

Colleen Abruce, owner of Noire Luxe Candle Bar in Seattle, describes the mixed conditions facing her small business. She says the company is entering “candle season,” with many bookings and holiday-party events, and began preparing in July by ordering supplies, building inventory, releasing new catalogs, and trying to determine what customers could afford. She says no business can be fully prepared and that she is instead trying to anticipate as much as possible “in a reasonable manner.” Abruce says costs have been relatively stable, but shipping has become more difficult, with more delays expected during the holiday season. Staffing is currently manageable because she has seasonal workers available, although most of her employees are college students and their school schedules—and occasional social events—can create gaps. Her larger concern is consumer uncertainty. Customers are being cautious about spending, and Abruce says she often lies awake thinking about how to sustain and innovate in a changing economic environment. Her experience provides a small-business counterpoint to the stronger spending data coming from wealthier consumers and large companies.

Kai says the stock market may currently be functioning as a stand-in for the economy because the “Magnificent Seven” technology companies account for about one-third of the S&P 500’s total market capitalization. Since many workers invest through 401(k)s and 403(b)s, he argues that a large number of retirement savers are indirectly exposed to AI companies. Patricia McCoy, a Boston College law professor specializing in financial regulation and consumer protection, agrees that the exposure is widespread and troubling because people’s retirement accounts and pensions depend on these investments. McCoy says the risk is that AI companies could miss earnings targets because of enormous cash needs or because demand ultimately falls short of expectations. Investors could then pull money from the sector. Avoiding exposure is difficult: S&P 500 index funds are heavily weighted toward AI-related companies, and even bonds are increasingly connected to AI because loans and bond offerings are being directed to the sector. Asked what she would tell the SEC chairman, McCoy calls for stronger risk management and complete transparency in stock and bond markets, criticizing an attitude in the AI sector that current profits will continue forever. She compares the moment with earlier technological shifts such as railroads, electricity, and the internet, all of which produced major change but also included busts and financial crises. Recalling 2008, when a loss of confidence in subprime mortgages helped send stocks down 50% and caused widespread job and housing losses, McCoy says she is personally “writing it out” but has stockpiled about three years of cash because she has a shorter investment horizon. The rest of her money remains in stocks and bonds.

The program’s market report says the Dow fell 652 points, or about 1.25%, to 52,215; the Nasdaq declined 53 points, or 0.2%, to 25,955; and the S&P 500 fell 39 points, or 0.5%, to 7,623. For the week, the Dow gained 0.4%, while the Nasdaq lost 0.7% and the S&P 500 lost about 0.5%. Brent crude rose above $116 per barrel and West Texas Intermediate above $103. Apple shares slipped after the release of its roughly $2,000 folding iPhone Duo, Google shares fell about 1.25%, and the 10-year Treasury yield rose to 5%. Kai then examines October’s S&P Global purchasing managers’ index. S&P Global economist Chris Williamson says business activity remained near a five-year high, with manufacturing and services both growing and the upturn broad-based. Nationwide economist Kathy Bostjancic says AI is helping drive manufacturing and construction, although residential housing remains weak. The less favorable news is that prices charged for goods and services are rising at their fastest pace in four years, well above the Fed’s target. Williamson says companies are absorbing higher fuel and energy costs and passing them on without yet damaging profit margins or driving customers away. Credit insurer Allianz Trade’s Dan North says the economy is being supported by the top 20% of earners, whose housing and stock-market wealth makes them less sensitive to high prices even as consumer sentiment and disposable-income growth weaken.

Marketplace reporter Lila Goldstein visits an abandoned online-fraud compound in Southeast Cambodia that looks like a technology campus, complete with basketball courts, restaurants, and rows of office buildings. Inside, she finds empty desks, overturned chairs, AT&T and T-Mobile SIM cards, call scripts, and notebooks. One handwritten script advises scammers to build romantic trust by having victims imagine “a yard, a cat, a daughter, sunshine and breakfast.” The goal was often to persuade victims in the United States, the United Kingdom, or China to invest in a fraudulent cryptocurrency-trading application. Jason Tower of the Global Initiative Against Transnational Organized Crime says the victims were induced to buy cryptocurrency and transfer it to wallets controlled by criminals, who moved and laundered it immediately. The workers themselves were often victims. Foreigners were recruited with promises of high-paying jobs in Cambodia, then had their passports confiscated and were forced to work under threats and violence. In a sealed warehouse, journalists see more than 11,000 mobile phones used in “phone farms” to automate calls and operate thousands of social-media accounts. Cambodian Deputy Prosecutor Sang-Hee Young says Cambodia is not a safe haven and does not tolerate online scams. But Harvard Asia Center fellow Jacob Sims argues that closing large compounds has not solved the problem. Cambodia has developed a broader “tech ecosystem” for organized crime, including stablecoins, crypto-money laundering, and mixer tools. Operations can move to smaller sites or relocate to countries such as Sri Lanka and Madagascar. The episode ends with American Express announcing 3,500 job cuts—about 5% of its workforce—following reductions at eBay, Volvo, and Barclays.