A Wall Street Firm Modeled Out an AI Crash: S&P 500 Down 30%, $20 Trillion Gone. But Here’s What Happens Next
Tech stocks closed out October on Friday with the Nasdaq Composite’s worst month since March 2025, and the strain has reached the bond market too. Intel (NASDAQ:INTC) stock plunged 29% in one day, and CoreWeave (NASDAQ:CRWV), whose bonds came under heavy selling over worries about an AI slowdown and its weak balance sheet, has seen its stock drop 35% over the month.
Those jitters are the backdrop for a recent report in which TS Lombard’s Dario Perkins models what happens if the AI investment boom ends. In his scenario, U.S. stocks fall at least 30%, wiping out about $20 trillion in market value. However, the firm’s advice is still calm: hold a normal amount of risk through diversified global stocks, don’t bet against tech too early, and add government bonds only once strain shows. The firm’s working assumption shows a reversal in early 2028, though it says that date could slip. Perkins writes that the recent market wobble may be the beginning of the end or may blow over, and the report does not claim to know which.
Image source: Getty Images.
Perkins, managing director for global macro at TS Lombard, says the firm does not know when the boom will end, so its answer is not to try to time it. In the report’s words, “Investors can maintain a normal amount of risk via a diversified portfolio of global stocks.” The firm argues this bubble differs from the dot-com era because it is “much more concentrated on the U.S. and the AI supply chain,” so investors can hold exposure that sidesteps the most concentrated bets.
Bonds come second. TS Lombard says investors “can also add government bonds, but only once signs of fragility emerge.” The reasoning comes down to timing. Shorting U.S. tech now, or adding long-dated bonds early, would risk underperforming if the investment boom runs for several more years, with stocks rising and yields drifting higher in the meantime.
The report also expects non-U.S. stocks to outperform over time and argues the dollar is ultimately headed lower.
Source: www.fool.com — article syndicated from the publisher’s feed; all rights remain with the original publisher.