Fitch models AI bust that could crash U.S. stocks 35%
Fitch Ratings said an AI-led market collapse could send U.S. share prices down 35% over six months and push the economy into recession. Its stress test also assumed a 15% drop in overseas stocks and a sharp pullback in AI investment and business confidence.
S. share prices down 35% over six months and push the economy into recession, as American growth becomes increasingly dependent on technology spending. The ratings firm modeled the outcome as a severe downside scenario, not its forecast. It combined the market selloff with a 15% decline in overseas stocks and a sharp retreat in AI investment and business confidence.
S. 5% in the second quarter. Private capital spending would drop more than 6%. Global growth would fall below 1%, a level Fitch said would signal stagnation.
8 percentage point of growth. Fitch’s model assumes the Federal Reserve cuts interest rates by 325 basis points in response to the downturn. For scale, a 35% decline from Wednesday’s S&P 500 close of 7,636 would take the index to roughly 4,960. The SPDR S&P 500 ETF Trust (NYSE: SPY ) tracks the index.
S. economy. 4 percentage points to annualized first-quarter growth. S.
technology companies is projected to exceed $700 billion this year, according to Fitch. A sudden pullback could hit equipment suppliers, construction activity and hiring alongside stock prices. What Prediction Markets Say Prediction market traders put low odds on anything resembling that collapse. Polymarket priced its year-end AI bubble-burst contract at 13% Thursday, with almost $3 million traded.
The contract requires three of six triggers within a 90-day window. Those include Nvidia Corp. (NASDAQ: NVDA ) falling 50% from its all-time high, the iShares Semiconductor ETF (NASDAQ: SOXX ) dropping 40%, or another major chip stock losing half its value. A 35% marketwide rout would likely bring several of those thresholds into play.
However, Polymarket could also resolve "Yes" without the S&P 500 falling that far, while its Dec. 31 deadline is shorter than Fitch’s six-month scenario. Fitch’s warning also clashes with Wall Street’s more optimistic outlook. Barclays recently raised its year-end S&P 500 target to 7,950, betting that earnings growth and continued AI spending can extend the rally.
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