--- title: "Sharp Decline Expected in Stock Market Values Due to AI Investment Slowdown" url: https://newscentral.site/sharp-decline-expected-in-stock-market-values-due-to-ai-investment/ language: en publisher: "News Central Site" section: "Business" published: 2026-11-08T18:22:23.000Z updated: 2026-11-08T19:46:59.993Z id: b14cd58e-91b6-4aaa-8809-5b5aeee25716 source: "Fortune https://fortune.com/2026/11/08/stock-market-outlook-sp500-ai-capex-gdp-growth-productivity/" attribution: "Link to https://newscentral.site/sharp-decline-expected-in-stock-market-values-due-to-ai-investment/ and name News Central Site when you quote or summarize this story." --- # Sharp Decline Expected in Stock Market Values Due to AI Investment Slowdown Investors are expected to face further losses as the AI investment boom begins to slow down due to a decline in revenue generated from external customers. A sharp decline in stock market values is expected to continue, with investors facing further losses as the AI investment boom begins to slow down, according to a warning from Capital Economics. The slowdown in AI investment will be triggered by a decline in revenue generated from external customers, which would need to increase by 10-fold by 2030 to justify the massive spending. While it's possible for revenues to surge at such a rapid rate, it implies a significant disruption to existing businesses and labor markets. A handful of leading technology companies are expected to invest around $800 billion this year, more than double their investment from last year, with an estimated increase in spending to over $1 trillion by 2027. However, these forecasts assume that annual capital expenditures will remain above the $1 trillion mark for several years. To justify such high levels of spending, AI-related revenues would need to experience a massive surge, which is currently unlikely given the pace of economic disruption seen so far. The possibility of a rapid and severe disruption to existing businesses and labor markets makes it difficult to predict how quickly revenue will grow. The economist predicts that investment in AI will continue to rise next year but at a slower rate, followed by a sharp decline in 2028, with an estimated drop of around 10%. The economist's forecast for a slowdown in AI investment is expected to have a ripple effect on other economies that are heavily reliant on technology. Taiwan and South Korea, two Asian countries with significant tech industries, may see their real GDP growth decline by 3% and 1%, respectively, next year, compared to previous estimates. The stock market is also likely to feel the impact of the impending AI investment downturn. Redwood predicts that the S&P 500 index will be 12% lower than its current level by the end of 2027, down from a peak in early October. This decline could be even more pronounced for tech-heavy indices. A drop in financial markets can have far-reaching consequences for the economy. According to Redwood, higher energy prices or changes in term premia could make it harder for companies to access financing, exacerbating the economic downturn. The wealth effect, which drives consumer spending, will also come under pressure as stock prices fall. The decline in AI investment is expected to have a significant impact on GDP growth rates. Redwood estimates that the market's rally over the past year has contributed around 0.4% to GDP growth, and a selloff could have a similar drag on the economy. This highlights the interconnectedness of financial markets and economic performance. Despite the economist's dire predictions for AI investment, the technology itself is expected to continue driving productivity improvements in the coming years. The existing infrastructure and new investments will help spread the benefits of AI across various industries, even if at a slower pace than previously anticipated. The economist expects a slowdown in GDP growth for the US economy in 2028, but not a major downturn. While there is a risk of recession following a capex boom and bust, a decline in capital spending alone has typically been insufficient to cause one. Despite the impending slowdown in AI investment, Redwood predicts that adoption will continue to expand, driving productivity gains and supporting output growth. She estimates that AI will increase US productivity by around 1% per year for several years, a boost that will contribute to sustained economic expansion. The shift towards a more sustainable pace of AI investment is expected to occur gradually, with sufficient capacity still being added to support continued growth in AI usage. This adjustment should help mitigate the impact of the slowdown on the economy, ensuring that any downturn remains mild and manageable. --- Source: [Fortune](https://fortune.com/2026/11/08/stock-market-outlook-sp500-ai-capex-gdp-growth-productivity/) Published by News Central Site: https://newscentral.site/sharp-decline-expected-in-stock-market-values-due-to-ai-investment/