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All-In On AI: What Happens If the Bubble Pops In 2026?

Benzinga · 2d ago

Apollo Global Management Inc.'s (NYSE:APO) 2026 outlook, spearheaded by chief economist Torsten Slok, gives a sharp warning: the U.S. economy has become dangerously reliant on a single engine of growth—artificial intelligence.

As 2026 approaches, the S&P 500 has transformed into a concentrated bet. If the AI bubble were to pop, the fallout would likely cause widespread economic damage due to what Slok calls a “single point of failure.”

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“Single Point of Failure” 

The core of Apollo's concern is the unprecedented concentration of the S&P 500. For the first time in history, the 10 largest companies—largely driven by the AI narrative—comprise over 40% of the index's total market cap.

Capex Overload: Hyperscalers (like Microsoft, Google, Meta, Amazon and Oracle) plan to spend a record 60% of their operating cash flow primarily on AI infrastructure capex.

GDP Dependence: AI-related investment contributed more to U.S. GDP growth than consumer spending in 2025. AI has become the primary lifeline for the entire U.S. economy, driving the SPDR S&P 500 (NYSE:SPY) up by nearly 18% this year alone. 

What Happens if the Bubble Pops?

If AI demand signals weaken or the massive capex fails to yield immediate productivity gains, Apollo predicts several “cascading negative consequences.”

  1. Market Correction: A sharp “unwinding” of the Magnificent 7 would trigger a broader market correction. Since the S&P 500 is so top-heavy, a 20-30% drop in the leaders could wipe out years of gains.
  2. Infrastructure Freeze: A rollover in AI sentiment would lead to a sudden halt in data center construction and chip orders. 
  3. Recession Trigger: With non-AI growth already weak, the loss of AI investment could push the U.S. economy into recession. Apollo points to a 30% consensus recession probability for 2026.

"While we expect the AI cycle to continue in 2026, any rollover would have material negative consequences … We are therefore monitoring all dimensions of the AI story extremely closely," Apollo concluded. 

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