Investing in an Era of Disruption

August 2025 Client Letter

In an age of constant media churn, politics often dominates the news headlines. For investors, this sometimes makes it challenging to separate fact from opinion or find a clear, nonpartisan view of what’s really happening. Many are understandably frustrated when one network reports a story one way, only to hear a completely different take on another. This kind of polarization can make it harder to invest with confidence.

A prime example of this dynamic was on display with the release of the July U.S. jobs report.

The numbers were disappointing: only 73,000 jobs were added, well below the consensus estimate of 100,000. Worse, job gains for May and June were revised down by a combined 258,000, bringing the three-month average to just 35,000, a level that historically signals economic trouble.

Politically, the left suggested immigration policy as a factor, citing a sharp drop in the number of foreign-born workers in the labor force. Meanwhile, the right questioned the reliability of the data itself. President Trump even dismissed the head of the Bureau of Labor Statistics, alleging bias in the reporting.

Yet amid the finger-pointing, one critical factor may be slipping under the radar. The disruptor might not be immigration or data reliability, but instead artificial intelligence. The July employment report may be less about policy and more about a technological shift that’s transforming how work gets done.

AI Shaking up the Labor Market

Artificial intelligence is reshaping how companies operate, and it appears to me that the ripple effects are beginning to show in the labor market.

At the Cisco AI Summit this past January, Goldman Sachs (GS) CEO David Solomon revealed that artificial intelligence can now draft 95% of an IPO filing, specifically the Form S-1, in just minutes. An initial public offering (IPO) is when a private company offers shares to the public for the first time, transitioning to public ownership and raising capital for growth. What once required a team of six bankers working over two weeks now takes only a few minutes of machine time. “The last 5% now matters because the rest is now a commodity,” Solomon said. While he referenced six bankers, it’s reasonable to assume that figure excludes junior staff and support teams, likely bringing the total headcount even higher.

Microsoft: Scaling Without Hiring

This kind of efficiency isn’t isolated. Microsoft (MSFT) recently reported that revenue grew 18% year-over-year with no increase in headcount. The company has publicly stated it has no appetite to grow its finance team at the same pace as before, despite the business becoming more complex. AI is allowing Microsoft to scale its operations, streamline inefficiencies, and empower employees to do more with less.

The Crazy Efficient Revolution Behind Palantir’s Growth

Palantir Technologies (PLTR), a software platform company announced its earnings in early August. During the call, CEO Alex Karp shared a bold vision:

We’re planning to grow our revenue while decreasing our number of people. This is a crazy efficient revolution. The goal is to get 10 times revenue and have 3,600 people. We have 4,100 now.

Some analysts now forecast that Palantir could become a trillion-dollar company within the next few years. That kind of valuation is rare. What’s even rarer is the path Palantir is taking to get there: massive growth with a shrinking workforce. It’s difficult to find historical parallels for a company with such lofty expectations and such a lean operational model.

Amazon’s Robotic Workforce Surges Past One Million 

In its march toward large-scale automation, Amazon (AMZN) recently surpassed one million robots deployed across its global warehouses, up from 750,000 just a year ago. With AI now orchestrating robot movement in real time, Amazon’s fulfillment network continues to evolve as one of the most advanced logistical systems in the world. Meanwhile, Walmart (WMT), the world’s largest private employer, is undergoing restructuring. Walmart is cutting jobs and streamlining operations with AI tools. I wonder whether Walmart still sees value in holding the title of “largest employer” in an increasingly automated economy.

Lemonade: A Tech-Driven Approach to Insurance

Lemonade (LMND) is a relatively new player in the insurance industry. The company is aiming to disrupt traditional models through artificial intelligence by using AI-powered bots, which are software programs designed to perform tasks automatically without human intervention. These bots handle everything from onboarding to claims processing, often in seconds, delivering a faster and more transparent experience for policyholders. This tech-first approach allows the company to scale efficiently with fewer employees than legacy insurers. While still small in market cap (around $4 billion), Lemonade has expanded into renters, homeowners, pet, and auto insurance, and it is gaining attention for its innovative model and improving financials.

A Contrasting Strategy: Meta’s Bold Bet on AI Talent

While many companies are trimming staff and leaning on AI to drive efficiency, Meta (META), formerly known as Facebook, is taking a different approach.

Instead of mass hiring or layoffs, Meta is selectively recruiting elite AI engineers and offering them compensation packages that resemble NBA-sized contracts. Some engineers reportedly receive multi-year deals worth hundreds of thousands in base salary, with total packages reaching into the nine-figure range when stock and bonuses are included. These aren’t broad hiring waves. They’re strategic talent acquisitions, aimed at building Meta’s Superintelligence Lab and securing its place at the forefront of AI innovation.

This strategy fits squarely into the narrative: AI is not just replacing jobs; it is reshaping the value of work itself. In a labor market where efficiency is often a priority, Meta is betting that investing in the best minds will yield exponential returns. It’s a reminder that AI isn’t just a cost-cutting tool; it’s a lever for transformation.

AI: Bull Case, Bear Case, or Middle Ground?

Artificial intelligence is positioned to reshape the global economy, but how that transformation unfolds remains uncertain.

The bull case envisions a super cycle that unlocks massive efficiency gains across industries. Agentic AI, a term describing systems capable of making decisions with minimal human input, could automate not just repetitive tasks but complex cognitive work, giving workers a virtual team of assistants working around the clock. This could accelerate innovation in fields such as drug development, sciences, and logistics, potentially lifting global growth and living standards.

The bear case warns of a “jobs apocalypse.” Unlike past technological revolutions that replaced physical labor, AI is replacing cognitive labor—threatening jobs in customer service, analysis, and creative fields. If high-paying jobs disappear faster than new ones emerge, consumer spending could decline, triggering deflation or a slowdown in the economy.

The reality may lie somewhere in between. AI agents, which are software programs designed to act autonomously with other systems, are still evolving, and their limitations could slow adoption, giving the economy time to adapt. Governments may intervene to protect jobs or regulate AI’s reach. And new industries we can’t yet imagine may emerge, creating fresh opportunities and roles.

Navigating Disruption: What AI Could Mean for Your Portfolio

So, what does this mean for investors? A balanced approach that plays both offense and defense may be prudent.

On the offensive side, foundational AI players like Alphabet (GOOGL), Amazon, Broadcom (AVGO), Meta, Microsoft, Nvidia (NVDA), and Oracle (ORCL) offer exposure to the infrastructure driving the AI revolution. These firms have the scale, capital, and networks to lead the AI transformation. They’re building the platforms, chips, and data centers necessary to power the future.

On the defensive side, maintain exposure to sectors less likely to be disrupted by AI. Industries such as utilities, energy, and infrastructure—represented by companies including Chevron (CVX), Exxon Mobil (XOM), Kinder Morgan (KMI), Southern Company (SO), Union Pacific (UNP), and Valero Energy (VLO)—provide essential services that AI is unlikely to replace. These firms also offer exposure to real assets, which can be valuable in times of market volatility.

In short, investing in an era of disruption can include a balance of innovation with resilience. It’s about positioning portfolios to benefit from technological breakthroughs while staying grounded in the fundamentals that support the economy.

As always, we’re here to help you navigate what’s next. If your financial situation has changed—or if you have questions about your investment portfolio—please don’t hesitate to call us at (800) 843-7273.

Warm regards,

Matthew A. Young  
President and Chief Executive Officer