403
Sorry!!
Error! We're sorry, but the page you were looking for doesn't exist.
U.S. AI Stock Downturn Could Provoke USD35T Global Meltdown
(MENAFN) A massive downturn in American artificial intelligence equities threatens to unleash turbulence across worldwide financial markets, fresh survey data reveals.
The findings emerge from the World Economic Forum's "Chief Economists' Outlook: January 2026" report, released January 16th in advance of the organization's 56th annual gathering in Davos, Switzerland.
WEF researchers found that 2025's global market surge hinged predominantly on Wall Street's performance, with AI-focused enterprises leading the charge. The so-called "Magnificent 7" technology behemoths—Apple, Microsoft, Amazon, Alphabet, Meta, Nvidia, and Tesla—now command nearly 35% of total index market capitalization, a dramatic jump from 20% recorded in November 2022.
During this same timeframe, cryptocurrency values tumbled while gold delivered its most robust yearly gains since 1979, driven by escalating uncertainty and investor flight toward traditional safe-haven instruments. The US dollar simultaneously reversed its April-initiated decline, gaining strength against competing global currencies.
The survey, executed between November 19 and December 3, 2025, uncovered alarming sentiment: 52% of participating economists predict American AI stocks will depreciate in 2026. Approximately 9% foresee a significant plunge, though 42% anticipate continued appreciation.
Anxiety surrounding US markets contrasts sharply with growing confidence in Chinese and European equities. Roughly 68% of respondents project Chinese AI stocks will maintain upward momentum, while 59% expect European stocks to build on 2025's strong showing.
Regarding alternative assets, 54% of economists believe gold reached its zenith in 2025, with 46% predicting further increases. Some 62% anticipate additional cryptocurrency losses following the October 10, 2025 crash, which stripped Bitcoin of approximately one-quarter of its value within two months. Additionally, 54% of respondents forecast continued US dollar weakness.
Rising valuations and investor psychology are stoking "asset bubble" fears, the report warns.
The Bank for International Settlements identified bubble-like patterns in both US equities and gold—the first parallel surge of this magnitude in fifty years.
The European Central Bank cautioned in its most recent financial stability assessment that inflated US technology stock prices stem from fear of missing out (FOMO), warning that adverse developments could trigger sharp price corrections.
The International Monetary Fund stated in its October 2025 Global Financial Stability Report that market concentration around the Magnificent 7 has heightened risks, and negative developments could potentially spread to global stock and bond markets.
However, the IMF report also presented arguments against comparisons with the dot-com bubble, noting that AI firms have achieved high levels of profitability, supported by strong earnings growth and substantial real investment in data centers and infrastructure. Price-to-earnings ratios remain consistent with expectations of continued growth and are still below some peaks seen during the dot-com era, the fund noted.
Both the IMF and the Organization for Economic Co-operation and Development credited AI capital expenditure with substantially bolstering US economic expansion in 2025, even excluding tariff-related activity.
Potential US Stock Market Crash Could Cost $35T
An overwhelming 74% of WEF survey participants indicated that substantial losses in US AI asset valuations would reverberate globally, while just 26% anticipate more contained repercussions.
The report referenced projections from former IMF chief economist Gita Gopinath estimating that a potential US stock market crash could result in losses of up to $35 trillion.
A correction matching the dot-com crash's severity could erase more than $20 trillion in US household wealth, while foreign investors could lose over $15 trillion globally, according to the assessment.
Some 66% of respondents warned that a steep US dollar decline would likewise produce widespread consequences. Most economists, however, expect price fluctuations in gold, cryptocurrencies, and Chinese and European equities would generate more geographically limited impacts.
The findings emerge from the World Economic Forum's "Chief Economists' Outlook: January 2026" report, released January 16th in advance of the organization's 56th annual gathering in Davos, Switzerland.
WEF researchers found that 2025's global market surge hinged predominantly on Wall Street's performance, with AI-focused enterprises leading the charge. The so-called "Magnificent 7" technology behemoths—Apple, Microsoft, Amazon, Alphabet, Meta, Nvidia, and Tesla—now command nearly 35% of total index market capitalization, a dramatic jump from 20% recorded in November 2022.
During this same timeframe, cryptocurrency values tumbled while gold delivered its most robust yearly gains since 1979, driven by escalating uncertainty and investor flight toward traditional safe-haven instruments. The US dollar simultaneously reversed its April-initiated decline, gaining strength against competing global currencies.
The survey, executed between November 19 and December 3, 2025, uncovered alarming sentiment: 52% of participating economists predict American AI stocks will depreciate in 2026. Approximately 9% foresee a significant plunge, though 42% anticipate continued appreciation.
Anxiety surrounding US markets contrasts sharply with growing confidence in Chinese and European equities. Roughly 68% of respondents project Chinese AI stocks will maintain upward momentum, while 59% expect European stocks to build on 2025's strong showing.
Regarding alternative assets, 54% of economists believe gold reached its zenith in 2025, with 46% predicting further increases. Some 62% anticipate additional cryptocurrency losses following the October 10, 2025 crash, which stripped Bitcoin of approximately one-quarter of its value within two months. Additionally, 54% of respondents forecast continued US dollar weakness.
Rising valuations and investor psychology are stoking "asset bubble" fears, the report warns.
The Bank for International Settlements identified bubble-like patterns in both US equities and gold—the first parallel surge of this magnitude in fifty years.
The European Central Bank cautioned in its most recent financial stability assessment that inflated US technology stock prices stem from fear of missing out (FOMO), warning that adverse developments could trigger sharp price corrections.
The International Monetary Fund stated in its October 2025 Global Financial Stability Report that market concentration around the Magnificent 7 has heightened risks, and negative developments could potentially spread to global stock and bond markets.
However, the IMF report also presented arguments against comparisons with the dot-com bubble, noting that AI firms have achieved high levels of profitability, supported by strong earnings growth and substantial real investment in data centers and infrastructure. Price-to-earnings ratios remain consistent with expectations of continued growth and are still below some peaks seen during the dot-com era, the fund noted.
Both the IMF and the Organization for Economic Co-operation and Development credited AI capital expenditure with substantially bolstering US economic expansion in 2025, even excluding tariff-related activity.
Potential US Stock Market Crash Could Cost $35T
An overwhelming 74% of WEF survey participants indicated that substantial losses in US AI asset valuations would reverberate globally, while just 26% anticipate more contained repercussions.
The report referenced projections from former IMF chief economist Gita Gopinath estimating that a potential US stock market crash could result in losses of up to $35 trillion.
A correction matching the dot-com crash's severity could erase more than $20 trillion in US household wealth, while foreign investors could lose over $15 trillion globally, according to the assessment.
Some 66% of respondents warned that a steep US dollar decline would likewise produce widespread consequences. Most economists, however, expect price fluctuations in gold, cryptocurrencies, and Chinese and European equities would generate more geographically limited impacts.
Legal Disclaimer:
MENAFN provides the
information “as is” without warranty of any kind. We do not accept
any responsibility or liability for the accuracy, content, images,
videos, licenses, completeness, legality, or reliability of the information
contained in this article. If you have any complaints or copyright
issues related to this article, kindly contact the provider above.
Most popular stories
Market Research
More Story
Comments
No comment