The recent rampant rally of artificial intelligence concepts in the capital markets has not only fueled the prosperity of U.S. equities but also emerged as the core engine driving U.S. economic growth. However, a recent stress test report by Fitch Ratings warns that this economic structure, heavily reliant on a single technology track, harbors underlying vulnerabilities. Should AI-related stocks experience a severe correction within the next six months, the resulting chain reaction would extend far beyond Wall Street, potentially dragging the U.S. economy into a recession and sending shockwaves across the globe.
In this non-base-case risk scenario simulation, Fitch models an extreme condition where AI sector stocks plunge by 35% within six months. The core logic behind this scenario is that the market begins to significantly reassess the actual commercial returns generated by massive AI investments. Once this repricing materializes, U.S. GDP could contract by up to 1.5% by the second quarter of 2027. This would be accompanied by a sharp contraction in corporate capital expenditure, with private capital spending expected to plummet by over 6% and overall investment declining by 4.8%.
The current operating model of the U.S. economy has reached an unprecedented level of dependence on the technology sector. Data indicates that fixed investment in the information technology sector now accounts for approximately 5% of U.S. GDP, an increase of about one percentage point from pre-pandemic levels. This implies that any cooling in capital expenditure—ranging from foundational chips and data centers to cloud computing and software services—will directly drag down overall macroeconomic performance.
Beyond the reduction in physical investment, the reversal of the stock market wealth effect will serve as another critical blow. As AI concept stocks have continued their upward trajectory, the net worth of U.S. residents has expanded significantly. Currently, stocks and mutual fund shares held by U.S. households have reached a staggering $55.1 trillion, accounting for over 30% of total household wealth. Meanwhile, the ratio of total U.S. stock market capitalization to GDP has climbed to a post-war peak of approximately 200%. With household wealth deeply intertwined with the stock market, a massive correction in tech stocks would rapidly dampen consumer spending and drive up the unemployment rate.
This shock originating from U.S. capital markets will by no means remain confined to the North American continent. Through multiple channels such as finance, trade, and investment, the risks will quickly spill over. In Fitch's projections, a U.S. recession would cause global economic growth to fall below the 1% mark in 2027, a figure approaching global stagnation or even per capita recession. During this period, stock prices in major global capital markets, including China, Japan, and the United Kingdom, could also face a decline of around 15%.
This stress test does not represent a revision of the agency's current base-case forecast, but rather a simulation of potential risks. The report notes that as the weight of AI investment in economic growth, capital expenditure, and household wealth continues to increase, any future significant market reassessment of the profitability of related capital expenditures could see the initial valuation adjustments in tech stocks transmit to consumption, investment, employment, and global growth.
