A Wall Street Firm Modeled Out an AI Crash: S&P 500 Down 30%, $20 Trillion Gone. But Here's What Happens Next
Key PointsIf the AI boom ends, the scenario has U.S. stocks falling at least 30%, with tech down 40% and other sectors down 20%, which wipes out about $20 trillion in market value.
In a recent report, TS Lombard's Dario Perkins models a potential AI investment crash scenario. The breakdown: U.S. stocks could drop by 30%, wiping out around $20 trillion in market value, though the firm's advice is to maintain normal risk levels through diversified global stocks. CoreWeave's stock has dropped 35% this month amid concerns about an AI slowdown and weak balance sheets.
The report suggests holding bonds only once signs of fragility emerge, with the firm estimating AI-related debt losses at $125 billion to $190 billion. The AI boom is expected to end by early 2028, but the exact timing remains uncertain. Non-U.S. stocks are anticipated to outperform, and long-term interest rates could fall. The report advises that a diversified spread of global stocks should perform well if the boom continues, while a concentrated bet could fall if the AI boom breaks.
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