But fewer consumers of your products who are also earning less which means you can’t make up for it via higher prices. Taken to the hyped extreme AI means total economic destruction for labor and capital. In fact, unless it achieves self generation and maintenance of all supporting infrastructure and industrial inputs before this occurs then it’s the end of AI.
This is a consequence of potentially collective, uncoordinated action. It's possible that every individual company says "it makes no sense to be paying this much for labor, i'm getting cheap AI/robots" and fires a ton of people everyone else be damned, and then runs into lower demand later because everyone else is doing it. So everyone acts in their immediate interest to be collectively worse off, not unlike... a bank run!
The rich will be living in their towers with the lucky few allowed to serve them and get paid a pittance, while the rest of us are starving in the streets.
There is no single capitalism but many different flavors (US vs European welfare states).
It's not in the interests of capital to solve it.[0] Having high unemployment means cheaper labour. People have argued that capitalism should be replaced for more than a century, yet nobody's successfully displaced it.
[0] Obviously mass unemployment is bad for the economy in general, which would also ultimately impact capital, but for some reason that always seems to be a lesser concern.