AI Bubble Risks Worst S&P 500 Crash Since 2008, Strategist Says
Joachim Klement says hyperscalers’ depleted cash flows and rising borrowing costs could end the AI trade, leaving the S&P 500 36% below current levels.
- Panmure Liberum strategist Joachim Klement warned the artificial intelligence trade could end as soon as 2027, potentially triggering a severe market crash. "My core conviction is that the AI bubble will either burst in 2027 or in 2028," Klement said.
- Klement's outlook shifted due to concerns that stubborn inflation and rising borrowing costs could derail AI-related infrastructure spending. Bloomberg Intelligence estimates hyperscalers' capital spending in 2026 could hit $713 billion.
- Projections indicate equities could face 36% downside from current levels by 2027, while The Stoxx may fall more than 30%. These forecasts are the most bearish among Bloomberg-tracked strategists.
- Rather than advising clients to sell now, Klement suggests developing contingency plans and timing tools. His number one recommendation is "to go full defensive" once equities drop below the benchmark's 200-day moving average.
- Temasek International's chief investment officer Rohit Sipahimalani warned earlier in October that a reversal of the AI trade remains a key risk, even as Citigroup strategists remain optimistic that solid 2027 earnings will support further gains.
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The head of market strategy of an investment bank in London has a strong warning for investors: the investment wave in artificial intelligence (AI) can come to an end soon, which could trigger the most severe market fall since the global financial crisis. Shares have reached record levels worldwide this year, driven in part by the optimism with the increase in AI infrastructure spending. However, Joachim Klement of Panmure Liberum said that its …
Bank Banmore Leprom's strategy is likely to burst the artificial intelligence bubble in two years, and American equities will drop 36% by the end of 2027, amid increased financing costs and liquidity pressures, in anticipation that is contrary to the optimism of most of its counterparts.
The Hindu Business Line
BizTocAI bubble risks worst S&P 500 crash since 2008, strategist says
The head of market strategy at a London investment bank has a stark warning for investors: the artificial-intelligence trade may soon be over in what could trigger the most severe market crash since the global financial crisis.
Is the idyll ending on Wall Street and other markets? A veteran London banker urged investors to be cautious: "build a backup plan."
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