LONDON, Oct. 8, 2026 | Joachim Klement, head of market strategy at Panmure Liberum, says the AI trade could end as soon as 2027 and trigger the sharpest market sell-off since the global financial crisis, according to a Bloomberg report published Oct. 8. His year-end 2027 target for the S&P 500 is 5,000, about 36% below current levels.
"My core conviction is that the AI bubble will either burst in 2027 or in 2028, so sometime in the next two years," Klement said. He added that he is "starting to worry people today for something that I think might happen in six to nine months." Klement acknowledges his bearish call may be premature.
The Case Behind the Forecast
Klement points to the finances of the biggest AI spenders. He says hyperscalers' free cash flows are largely depleted and that the cost of debt is rising quickly and becoming prohibitive for these firms. Stubborn inflation and higher borrowing costs, he argues, could derail AI infrastructure investment, while markets focus almost entirely on tech earnings and overlook macro and credit risks.
The spending involved is large. Bloomberg Intelligence estimates that hyperscaler data-center capital spending in 2026 could more than double from 2025 to $713 billion, and rise further in 2027 at a slower pace. Global equities have hit record levels this year, partly on optimism about that build-out.
Panmure Liberum first set out the forecast on Oct. 5, according to Reuters via Kitco. At the time the S&P 500 closed at 7,722.72, up 12.8% for the year, and the current bull run began in October 2022. The firm also expects Europe's STOXX 600 to fall to 430, more than 30% below current levels, and the FTSE 100 to reach 8,260 by the end of 2027. In mid-September, Klement's assumption was that the S&P 500 would reach 8,300 by the end of 2027, so the call is a sharp reversal.
Where Klement Stands Among Strategists
Klement is the most bearish of the strategists Bloomberg tracks. The other seven average a potential 14% upside for the S&P 500, and Reuters notes that several brokerages expect the index to finish 2026 at or above 8,000. Citigroup strategists said solid 2027 earnings can support further global equity gains despite higher rates and geopolitical risk. Temasek's chief investment officer, Rohit Sipahimalani, warned the same week that a reversal of the AI trade is a key risk.
Klement does not advise selling now. He recommends building contingency plans and timing tools to spot the start of a crash, and says investors should go fully defensive if the S&P 500 falls below its 200-day moving average. In that case he favors ultra-defensive sectors such as food, tobacco and pharmaceuticals. "Now is the time to make contingency plans," he said. This is one strategist's forecast, not a consensus view, and it is not investment advice.
Frequently Asked Questions
What did Joachim Klement say about the AI bubble?
Klement, head of market strategy at Panmure Liberum, says the AI bubble will burst in 2027 or 2028. His base case sees the S&P 500 at 5,000 by the end of 2027, about 36% below current levels. He is the most bearish strategist tracked by Bloomberg.
Why does he think the AI trade could end?
He cites depleted free cash flow at hyperscalers, rapidly rising debt costs, and stubborn inflation and higher borrowing costs that could derail AI infrastructure spending.