3 hrs ago
Fitch Warns AI Market Correction Could Trigger Global Recession
Fitch Ratings says the AI boom is helping the US economy grow.
Companies are spending heavily on technology and AI infrastructure.
Rising stock prices are also helping some people spend more money.
But AI investments may not produce as much profit as expected.
If stock prices fall sharply and companies reduce AI spending, businesses and consumers could spend less.
Fitch says this could cause the US economy to shrink in 2027.
Other countries, especially those that trade heavily with the US or make technology products, could also be affected.
The Federal Reserve might respond by cutting interest rates.
Fitch says this is a warning scenario, not its main prediction, and it still expects resilient global growth.
Fitch Ratings says a sharp AI investment pullback and equity-market decline could push the United States into recession in 2027.
Its downside scenario assumes US equities fall 35%, non-US equities decline 15%, and private investment suffers a confidence shock.
Under that scenario, US GDP would contract 0.6% and global growth would fall below 1% in 2027.
Eurozone and Chinese growth would be 0.8 percentage points below baseline forecasts, while Canada, Mexico, and South Korea could face significant effects.
Fitch says its base case remains resilient, forecasting global growth of 2.6% in 2026, 2.5% in 2027, and 2.6% in 2028.
- Who
- Fitch Ratings, with potential effects on the United States and other major economies.
- What
- Fitch modelled a possible economic shock caused by a sharp decline in equity prices and AI investment.
- Where
- The scenario centers on the United States but could affect global markets, including the eurozone, China, Canada, Mexico, and South Korea.
- When
- The projected effects would occur primarily in 2027; Fitch also issued forecasts for 2026 and 2028.
- Why
- Elevated equity valuations and uncertain future AI profits could lead to reduced investment, weaker consumer demand, and slower economic growth if the market reverses.
Downside Scenario
Fitch Base Case
Economic outlook
Downside Scenario
A 35% US equity decline, a 15% fall in non-US equities, and weaker private investment could push the US into recession and reduce global growth below 1% in 2027.
Fitch Base Case
Fitch says the AI stress scenario is not its baseline forecast and expects the global economy to remain resilient.
AI investment
Downside Scenario
A sharp reversal in AI spending could weaken business investment, consumer demand, and economies linked to US trade and technology industries.
Fitch Base Case
If AI spending and elevated equity valuations remain intact, they can continue supporting economic growth.
Key facts
- US equity decline in scenario
- 35%
- Non-US equity decline in scenario
- 15%
- US GDP impact in 2027
- A contraction of 0.6%
- Global growth in 2027 scenario
- Below 1%
- Projected eurozone and China impact
- Growth 0.8 percentage points below baseline forecasts in 2027
- Estimated US rate cuts
- 325 basis points
- Fitch base-case global growth
- 2.6% in 2026, 2.5% in 2027, and 2.6% in 2028
Sources
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