It is sometimes said that the stock market is the only place in the world where people want more of it when prices go up and less of it when prices go down. And during the past three weeks, stock prices have been going down.

The reason most often ascribed to the current stock market malaise is the growing fear that the economy may soon slip into recession. Last week, we learned that the national unemployment rate rose to 4.3%. That’s its highest level since October 2021.

At the same time, the economy added 114,000 net new jobs last month, far below the 175,000 expected on Wall Street. Presumably, if employers felt the economy was expanding then they would not be reducing headcount.

That may be true, but it may signify something else altogether. During the past year, artificial intelligence (AI) has taken the stock market by storm.

Over the past two years, high speed memory device manufacturer NVIDIA (NSDQ: NVDA) has appreciated 1,000 percent. Demand for NVIDIA’s products has skyrocketed as more companies find ways to integrate AI into their processes.

To be sure, AI is a wonderful tool that can greatly enhance productivity. At the same time, those gains in productivity can decrease the need for human labor.

In short, what we may be witnessing is the flip side of the AI coin. If that is the case, then the recent stock market selloff may be a misinterpretation of recent employment data.

Shrinking Consumerism

There is no scenario under which rising unemployment is good. However, there is a scenario where the costs of rising unemployment in the form of decreased consumer spending are more than offset by gains in corporate productivity.

Since the end of World War 2, the United States economy has thrived on consumer spending. The “baby boomer” generation that was born after the war was well educated, ambitious, and materialistic.

I am one of them. I was born in 1959, which makes me a relatively young baby boomer. At the age of 65, I am less ambitious and materialistic than I used to be.

So are most of the people my age that I know. We’ve put in our time and now want to downsize our lifestyles and budgets so we can relax.

That may be good for us financially, but not such good news for consumer products manufacturers. They require constantly increasing demand for their goods to increase profitability.

No doubt, human beings will always require consumer products. However, they may not need as much of them in the future as they have in the past. Population growth is slowing down and the shrinking middle class in America has less disposable income with which to buy non-essential goods.

For that reason, many companies are aggressively adopting AI to maintain their profit margins. When AI is combined with robotics and other forms of workplace automation, there is less demand for human labor.

That is not a doomsday scenario for the economy or the stock market. But what it does mean is this: For the U.S. economy to continue to grow at a healthy rate, it must become less reliant on consumerism.

Expanding Automation

The recent stock market selloff was indiscriminate. All the major stock market indexes have fallen markedly over the past three weeks, as has every sector of the stock market.

That is bad news for index investors but is good news for stock pickers. Not every company will be equally impacted by a weakening labor force. In fact, some of them will benefit from increasing reliance on automation.

Many of those businesses are held by the Global X Robotics & Artificial Intelligence ETF (NSDQ: BOTZ). As its name implies, this fund’s objective is “to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Indxx Global Robotics & Artificial Intelligence Thematic Index.”

If unemployment is going up because demand for labor is going down, then this fund should benefit from that trend. And given Wall Street’s propensity to sell everything when it gets nervous, this fund is a lot cheaper now than it was just a few weeks ago.

On July 17, BOTZ closed above $32. Since then, it has fallen below $29 (circled area in chart below). That is as low as it’s been since January, erasing nearly all of this year’s gain.

I believe now is a good time to open a position in BOTZ. In fact, I bought shares of BOTZ at the start of this week in my own account. It may go lower, but I’d rather get in a little early than miss out altogether.

I’m not an AI expert, which is why I prefer to own an ETF instead of an individual stock. But my colleague Robert Rapier does follow that market closely, and he just issued a report on his favorite AI stocks.

Want to learn about Robert’s latest money-making trades? Click here.