Junior roles are giving way to AI… and while that may seem like progress, it’s actually a dangerous trend.

From the desk of Miles Everson:

Investing has helped many individuals obtain financial freedom and independence for decades.

That’s why every Wednesday, I talk about investing in the hopes of helping and inspiring others to build wealth through this activity.

In today’s  “The Independent Investor,”  I’ll talk about a macro trend that’s forming in the corporate world and why it’s not entirely good for businesses and investors.

Curious?

Keep reading below!

Junior roles are giving way to AI… and while that may seem like progress, it’s actually a dangerous trend.

Youth unemployment is on the rise… and artificial intelligence (AI) is partially to blame.

U.S. youth unemployment rates reached 10.8% this summer—the highest level since 2021, the year when America was still dealing with the aftermath of pandemic shutdowns.

Across other regions like Asia and Africa, the youth unemployment rates are even worse. In India and China, the rate is closer to 17%. Meanwhile, in Morocco, the youth unemployment rate is a staggering 36%.

Corporations are leaning on automation instead of training young talent. They frame it as  “boosting efficiency,”  though they're eliminating junior roles that were once essential to their operations.

A company that relies too heavily on AI can appear streamlined on the surface. Fewer salaries to pay means higher profits. But underneath, human judgment is slowly disappearing—and that's where small errors are beginning to stack up in the corporate  and  investing worlds.

Not A Perfect Substitute for Human Labor

AI is good at monitoring large datasets and identifying behavioral patterns. That’s why it’s been used at detecting things like fraud.

However, when it comes to making judgment calls or spotting irregularities that fall outside of a model’s training data, that’s where AI starts to falter.

AI models like ChatGPT, for instance, do away with proper risk management work. They're more likely to produce answers they think users want to hear rather than spot outliers.

Despite this, more and more companies are leaning on AI to do a lot of the legwork junior staff used to do.

Fiserv  is a great example of how important junior positions are.

The company is one of the largest payment processors in the U.S. It had a reputation for steady growth, and analysts saw it as a dependable stock.

That view broke in a single day when Fiserv cut its full-year outlook in October. It lowered its revenue-growth guidance from a range of 10% to 12% down to just 4%. And it cut earnings expectations by nearly 20%.

While the news caught almost all of Wall Street off guard, Dominic Ball, a 26-year-old analyst at  Rothschild, saw it coming. He spent months analyzing the payment industry and Fiserv's platform. He saw that the business was weakening long before the guidance cut surfaced.

His work was straightforward but time-intensive, and it required judgment rather than AI pattern recognition—exactly the type of analysis companies lose when they eliminate junior roles and lean too heavily on automated systems.

It was a similar story with the  Tricolor  collapse last year.

The used-car company filed for Chapter 11 bankruptcy after allegations of collateral fraud (it was found to have promised the same vehicles as collateral to multiple lenders).

JPMorgan Chase, one of its lenders, had been using AI to automate the work of junior bankers, so it didn't catch any issues with the collateral. Rather, a young analyst at a small company called Waterfall Asset Management caught the irregularity and notified JPMorgan.

These events show how exposed the system becomes when young talent disappears.

Junior staff provide the vigilance that a computer model and more senior employees often miss.

AI is Not An Alternative to Human Judgment

AI models and agents can streamline operations, but they cannot substitute for human judgment. 

While cutting junior roles in favor of AI may help companies unlock higher short-term profitability, it’ll likely expose them to more painful risks down the line.

That’s why as an investor, it’s better to own companies that utilize AI tools to enhance their workforce rather than owning those who aggressively replace headcount with AI.

Hope you’ve found this week’s insights interesting and helpful.

Stay tuned for next Wednesday’s The Independent Investor!

There’s a funny thing about “sexy”—it doesn’t last.

Learn more about  why you shouldn’t invest in just “sexy” stocks  in next week’s article!