Fed will collide with the mother of all AI credit bubble

The Federal Reserve's decision to raise interest rates by 0.25% during a recent FOMC meeting has sparked fears of a catastrophic event, reminiscent of some of the most tumultuous periods in financial history. The article, titled "Fed will collide with the mother of all AI credit bubble," compares this event to the dramatic occurrences of September 15, 2008, September 11, 2001, and Black Wednesday in 1992, all of which have left lasting impressions on the author, Matein Khalid.

Khalid, who was present during the financial crises of 1992, 2001, and 2008, believes that the effects of the September 16, 2026 rate hike could be even more devastating. He cites the potential for a 7% increase in the yield of 10-year Treasury bonds as a result of a global economic downturn, estimating that this event could trigger a 30% decline in the US dollar. This, in turn, could lead to a significant dip in the Nasdaq, a market heavily concentrated in artificial intelligence (AI) companies.

The article warns that a potential AI credit bubble, fueled by the excessive growth of AI companies, could dwarf the impact of the dotcom bubble in 2000. The 6% Fed Fund rate projected for the following summer is expected to cause the Nasdaq index to plummet by as much as 90%, as AI companies struggle to justify their massive capital expenditures.

With the NRI deposits arranged by banks for Indian investors on the brink of a massive bond bear market, the article emphasizes the potential for a speculative time bomb of interest rate risk.

In light of these dire predictions, the author advises investors to consider selling their AI-related assets and seeking refuge in other forms of investment, such as gold, which is expected to soar to $2,400 an ounce. Khalid's message is clear: the AI credit bubble poses an unprecedented threat to the global economy, and investors must prepare for a financial storm of unprecedented proportions.