Gundlach, Zulauf Warn S&P 500 Could Drop 30%-50% as AI Boom Nears End
Updated
Updated · PANews · Jun 23
Gundlach, Zulauf Warn S&P 500 Could Drop 30%-50% as AI Boom Nears End
1 articles · Updated · PANews · Jun 23
Summary
Q3 2026 could mark a U.S. stock-market peak, with Jeffrey Gundlach and Felix Zulauf saying the next downturn would be a 30%-50% bear market rather than a routine 20% correction.
41% of the S&P 500 now sits in the top 10 AI stocks, while hyperscalers' capex-to-revenue ratios have jumped to 30% from 10%, chip-memory prices are up 200%-300%, and free cash flow is starting to turn negative.
Nearly $1.4 trillion in annual U.S. interest costs and a deficit expanding by $2 trillion a year could keep long Treasury yields elevated even in recession, they said, tightening financing conditions instead of easing them.
Private credit is the bigger hidden risk, Gundlach argued, citing bought ratings, redemption caps of just 5% in interval funds, and wildly inconsistent marks on the same loans as signs of a 2005-06-style breakdown.
An 8%-10% dollar drop during the 2025 tariff turmoil, instead of the usual rise seen in past selloffs, reinforces their view that U.S. stocks may lose global leadership as AI funding strains and credit cracks spread.
With U.S. debt spiraling and global rivals rising, is the AI boom the final party before the dollar's reign ends?
Is the true systemic risk hidden not in AI stocks, but in the opaque, unregulated private credit market funding the boom?
As AI giants borrow trillions for a tech revolution, are they building the future or the world's most expensive bubble?
AI Bubble Warning: $650 Billion Tech CapEx, Market Concentration, and Systemic Risks Trigger 2026 Market Turmoil
Overview
On June 29, 2026, the global financial landscape faced significant volatility, especially in technology and AI sectors. Heightened investor caution was driven by a mix of regulatory changes, shifting sentiment, and doubts about the sustainability of high AI-driven valuations. This uncertainty led to a notable downturn in Asian stock markets, with South Korea's KOSPI index tumbling 3.05% and Japan's Nikkei 225 dropping 1.31%. The turmoil reflects warnings from prominent macro investors about potential U.S. equity market declines, highlighting how interconnected risks and investor concerns are shaping current market dynamics.