AI’s entry-level hiring nightmare is another gift to boomers’ retirement plans

The same technology that may be blocking a 23-year-old from landing their first job is lifting their parents’ 401(k). AI, long something claimed to eliminate the entry-level workforce by half in the future, is also gaining a bigger foothold in the stock market: It’s driving high gains for retirees’ portfolios, according to a financial analyst, but is posing a question of risk ability for younger investors.

The Magnificent Seven companies alone accounted for over half of the S&P 500’s annual gains last year, just as AI-driven companies now make up over a third of the index’s companies. That means the same AI boom putting pressure on some entry-level jobs is also lifting the index funds, 401(k)s, and brokerage accounts on which many retirees rely. Morningstar data shows the 10 largest 401(k) mutual funds now average a 38% allocation to tech and communication services—a concentration that would have been considered aggressive speculation a decade ago.

But retirees are not passive beneficiaries since they face a mirror-image version of the same risk: less time to recover if the AI trade reverses. A sequence-of-returns shock in a tech-heavy portfolio at age 67 is not the same as a drawdown at 32. The upside and the fragility are two sides of the same coin.

The entry-level squeeze

A Stanford study found a 13% decline in employment for workers ages 22 to 25 in the most AI-exposed jobs, just as the leaders of those AI companies themselves warn of upcoming job displacement. Goldman Sachs estimates AI is eliminating roughly 16,000 net U.S. jobs per month, with entry-level workers absorbing the largest share. Entry-level job postings have fallen nearly 35% since January 2023, according to Revelio Labs, and among young software developers specifically, employment has dropped close to 20%. 

The Brookings Institution has documented that AI productivity gains are flowing disproportionately to workers earning around........

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