Fitch Warns AI Bust Could Lead to a 35% Drop in U.S. Stocks and Recession
Fitch Ratings has modeled a severe downside scenario where an AI-led market collapse could cause U.S. stock prices to fall by as much as 35% over six months, potentially triggering a recession. The firm noted that the American economy is increasingly reliant on technology spending, particularly in artificial intelligence (AI). In this hypothetical situation, global growth would slow significantly and the Federal Reserve might cut interest rates sharply in response. According to Fitch's model, U.S. GDP could contract by 0.6% in 2027 with year-over-year growth falling into negative territory. Private capital spending is expected to drop more than 6%, impacting equipment suppliers, construction activity and hiring alongside stock prices. Prediction markets currently assign a low probability of such an event occurring. Despite Fitch's warning, Wall Street remains optimistic about continued AI investment driving market gains. Barclays recently raised its year-end S&P 500 target to 7,950.
Topics: AI Fitch Ratings recession risk stock markets U.S. economy