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Strategist warns AI stock rally may end in 2027 or 2028
He projects the S&P 500 could drop about 36% and says hyperscalers’ free cash flow is mostly depleted as debt costs rise.
The head of market strategy at London investment bank Panmure Liberum warned that the AI-driven equity rally could unwind quickly, potentially triggering the worst market crash since the global financial crisis.
In an interview covered by Insurance Journal, Joachim Klement said his base case is that the AI trade disintegrates in 2027, with the AI bubble bursting either in 2027 or 2028.
Klement linked the risk to deteriorating fundamentals for AI hyperscalers, saying their free cash flows are largely depleted and that rising borrowing costs are becoming prohibitive.
He forecast a 2027 year-end S&P 500 target of 5,000, implying 36% downside from current levels, and projected Europe’s Stoxx 600 falling to 430 points, more than 30% below current levels.
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