Moneycontrol Pro Weekender | All that is solid melts into air

Dear Reader,

This week was all about the Global AI summit in Delhi. For most people, the summit was a great occasion to network, showcase capabilities, strike deals, and reassure investors that they had a plan to bend AI to their will. Here’s our full coverage of the summit.

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But behind the speeches, one could hear the rumblings of an approaching storm, a storm that would rip through businesses, jobs, economies, and nations. That may be doom-mongering, and it’s entirely possible that AI would open new opportunities, such as the post of AI whisperer. Honestly, we do not know whether, as Sam Altman said at the summit, we will have superintelligence in a few years. All we can do is echo Niels Bohr, the Nobel Laureate for Physics in 1922: “We are all agreed that your theory is crazy. The question that divides us is whether it is crazy enough to have a chance of being correct.”

Yes, AI disruption so far has been limited. But that is cold comfort, because it is accelerating at breakneck speed, at a rate that makes it difficult for society, the economy, and all of us to keep up — and, frankly, difficult for anyone writing about it. This speed is perhaps the most important factor shaping the political and economic landscape today.

A hundred and fifty years ago, the English novelist Samuel Butler wrote a satirical Utopian novel called Erewhon which imagined, among other things, a society where machines had evolved beyond human control. He wrote: “I fear none of the existing machines; what I fear is the extraordinary rapidity with which they are becoming something very different to what they are at present. No class of beings have in any time past made so rapid a movement forward. Should not that movement be jealously watched, and checked while we can still check it?”

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We are seeing capability improvements that would have once taken decades now compressed into months. AI agents have already started hiring humans. The ground keeps shifting beneath everyone's feet.

The moment a company finishes integrating one generation of AI into its operations, the next generation arrives, promising to make the freshly installed system obsolete. The massive capital expenditures of 2026 are but the beginning of a relentless upgrade treadmill, a treadmill they cannot get off. For workers, skills that were marketable two years ago are now replaced by AI tools that anyone can access. As the American novelist Kurt Vonnegut wrote, “People have no choice but to become second-rate machines themselves, or wards of the machines.”

Optimists counter that this is the familiar pattern of technological disruption, and it ultimately creates more jobs than those destroyed. In this context, Marx wrote almost 200 years ago, “All that is solid melts into air.” But previous disruptions unfolded across generations, giving labour markets time to absorb shocks. This one is unfolding in months. Dario Amodei said, “We are building a country of geniuses in a data centre.” Does that leave us not-geniuses on the scrap heap?

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This acceleration creates a mismatch between the scale of investment and returns. The technology sector is spending as if the future has already arrived, betting that the capabilities demonstrated in research labs will translate into profitable products. This FT story says the assumptions underpinning valuations of big US groups might be too optimistic. The gap between a technical breakthrough and a sustainable business model is wide, and nobody has a reliable map.

Stocks of India’s IT services firms reflect that uncertainty. We pointed out that IT services are losing ground in global technology spends, that AI has punctured the valuations of IT stocks, and that Indian IT must embrace AI. But as we pointed out in this analysis of Infosys: “While AI offers the potential for long-term efficiency gains, the immediate headwind includes increased pricing pressure from clients, the need for high investment costs in AI capabilities, and the erosion of revenue from traditional services.” We also have an FT story headlined: Software isn’t dead, but its cosy business model might be.

The major technology firms have no choice but to keep spending, keep building data centres, keep ordering chips, because the moment they stop, their valuations collapse. They are, in essence, cycling as fast as they can because stopping means falling. Is this what is meant by the “AI earnings supercycle”?

It’s true that vast swathes of work, such as that of plumbers or electricians, will be immune to AI. But consumption in most countries is dependent on the so-called ‘middle class’, whose jobs are most at risk. What happens to consumer demand then and to company earnings? The capital expenditure requirements of the AI revolution are so immense that smaller companies, let alone new entrants, simply cannot compete. What happens to these firms?

This concentration is clearly visible -- over thirty percent of the entire S&P 500's value is now tied to AI-related companies. That’s an extremely concentrated form of systemic risk. Also, acceleration cannot continue indefinitely without hitting physical limits. The energy consumption of AI infrastructure is fast becoming a constraint.

Who wins, who loses? A BIS paper out this week said AI could widen the global divide. AI is not being developed in a benign, inclusive, rules-based order. The race is not just about economic advantage; it is about military capability, surveillance capacity, and the ability to shape the information environment. Export controls, investment restrictions, are all signs that the major powers view AI as a strategic asset.

The United States controls the core AI infrastructure: the chips, the cloud platforms, the foundational models. Most other nations find themselves in a position of dependency and have responded with a rush towards “sovereign AI”. India too is attempting to leverage its scale and talent. It’s every nation for itself and the devil take the hindmost.

The speed of change is fraying the social fabric. Institutions that once provided stability — universities that guaranteed certain credentials would hold value, careers that offered predictable trajectories — are being undermined. And all this is coming on top of trade wars, hot and cold wars, intense geopolitical rivalry, a downplaying of patiently built international institutions, and environmental threats.

At the Delhi summit, with its focus on “voluntary commitments” and “inclusive AI”, the talk was of managing change, but the reality is that change is managing us, and the only genuine consensus is that no one knows how this ends. We wrote, “For the India summit, the challenge is to take the next big leap — converting dialogue into enforceable standards before AI development outpaces governance.” Or MANAV (Humans) may well become DANAV (Demons).

The saving grace is that despite these challenges, India remains a reasonably promising growth story that will find takers at a reasonable valuation.

The optimists are not entirely wrong. Constraints force creativity. Energy limits will push efficiency. The markets will ultimately separate genuinely useful applications from hype. The open-source community will continue to distribute what the hyperscalers monopolise. History suggests that societies can absorb technological shocks, but messily, unevenly, with considerable human cost. ‘Considerable human cost’ is the kind of phrase that sounds ok until you are the cost.

Simply put, the uncertainty is off the charts. The paradox is that the more powerful our tools become, the less control we appear to have over the direction in which they are deployed. We call this progress.

Cheers,
Manas Chakravarty

In case you missed them, here are some of the other stories and insights we published this week, apart from our technical picks in the equity, commodity, and forex markets:

Stocks

Can Gaudium IVF’s IPO gain a first-mover edge?
Weekly Tactical Pick – Can gold loans add sparkle to this bank’s stock?
Can Hyundai regain lost ground? Va Tech Wabag, Amber Enterprises, Mishra Dhatu Nigam, Vijaya Diagnostics Microfinance turns the corner, which stock stands out — Muthoot Microfin or CreditAccess Grameen?
Which stocks could get impacted as RBI tightens broker funding norms? MapmyIndia, Cello World, Coal India, Galaxy Surfactants, Hindalco, Senco Gold, Astra Microwave Products, Syngene, Endurance Technology