Could markets topple the global economy?

We're going to talk about the state of. the economy because that is likely to. dominate next year. Henry, you've. written and I can't say it's terribly. upbeat, but you've written the cover. story that goes with uh the world ahead. this week. And you have, you know, how. markets could topple the economy. That. is that is my kind of skiing there. Um. uh but tell me, give me your thesis. because it's quite a compelling thesis. the the thesis is simply that AI the AI. boom the stock market boom in the US has. been obscuring a lot of underlying. weakness and now we've reached a point.

where the valuations of AI companies are. so high that it could come undone quite. quickly now a lot of people will talk. about what that means in terms of lost. investment in the economy but as we were. just talking about a lot of that. investment flows to uh imports from. Taiwan what really matters is the effect. on the US consumer and the fact is that. the US consumer is really exposed uh to. the stock market. We've got a chart on. this in fact showing the percent of US. household wealth in stocks and in the. dotcom boom uh the enormous run up in. stocks in the late 1990s that reached.

17% 17% of household wealth in stocks. now or in the second quarter it's. probably high even higher now it's 21%. so then households are more exposed than. they were during the dotcom boom so if. you get a big market retrenchment it. could really hit the US consumer and. then I think the economy suddenly looks. quite a bit weaker. >> and it's it's it's not It's all kinds of. people investing in stocks. There's a. fabulous piece in the finance section. this week about how oldies are investing. in stocks. I mean there's and and and. one one woman in from her hospice made a.

major investment in Nvidia. Um it's rem. I mean it's a it's it's a great piece. You really recommend that you read it. It's an excellent piece. But but first. of all sounds as though you think there. is a stock market correction coming. >> Uh yes. I mean, I'm fairly bullish on AI. as a technology, but it but it is true. that the valuations have become. absolutely extreme, and I don't think. you can you can justify uh that yet. because we don't know where the profit's. going to be. >> So, let let's posit that there'll be a. correction. Tom, you're host of Inside. Tech. Is that going to make everybody. think next year that the, you know, AI.

bonanza was actually a bust? >> Um, I think this is going to be like. previous technologies that were in fact. world changing and the obvious ones are. railways and uh electricity and the. internet. um but they had uh crashes or. you know multiple crashes uh along the. way and people just generally got too. carried away. Uh there's a very striking. uh statistic in your leader that says I. think if you look at the AI capex up to. 2030 the amount of revenue a year you'd. have to generate after that to justify. is something like 650 billion. The. current global revenue from AI is about.

50 billion which is about 1/8 of Apple. or Google's revenue. So there is this. huge disparity between the amount of. money that people are planning to spend. and the the sort of trajectory of. investment and the actual uh flows of. money. And this is what we saw with the. dotcom booms as well that people were. throwing money at these.coms but they. weren't really doing any business. They. weren't selling anything. There weren't. enough customers. Uh eventually we. caught up and uh I think the same is. going to happen with AI. So I'm in a. similar position to to Henry that I'm. I'm long-term bullish about the impact. of the technology but I think there's.

going to be a crash before we get there. >> So John, do you share that view? And and. what do you think how do you think the. Trump administration will react if there. is a market correction and slowing of. the economy? >> Well, I'm so convinced by Henry. I share. that view and that's why I'm wearing a. tie today because I think there's loads. of evidence that when there's an. economic downturn in the US, a market. correction, men dress more formally come. back. I thought no co kills the tide. Sorry, I'm not budging. >> That's one of my predictions for 2026 is. the return of the tide for men and and. for how Donald Trump. react. He'll blame other people, right?

That's what he does. And I think one. like really interesting scenario to. think about is what if the correction. were sufficiently big that some. financial institutions were threatened. You'd then have Donald Trump in the. position of getting to decide who got. bailouts and who didn't. And I think he. would love that. And can you imagine the. orgy of lobbying and special interests. and favors being done? You know, suddenly having the president's ear. becomes a kind of existential question. for a lot of businesses. So I think.

there's a, you know, clearly it would. hurt his numbers. Uh, but I think he. might kind of love it. >> Fortunately, I think that's a little bit. less likely because a lot of this AI. investment is sort of equity finance. from the company's own cash flows at the. moment. But it's this weird thing where. the longer it goes on, the more the. finance financing is getting a bit. funky. >> Open AAI was talking about government. backing, which they quickly walk back. But what was that all about? Because. that sounds exactly like, you know, we. want to make sure that if things go. wrong, Donald Trump's got our back. >> Well, that's true. And that perhaps that. scenario plays out with the big AI. companies rather than with a big bank.

>> So that's so John Prito wears a tie. Everyone starts wearing ties. Open AI. goes and tries to get help from the uh. from the Trump administration. Um I I'm. sure the economy I like you. I can't. believe the stock market run can. continue. Something is going to happen. And usually two things I think two. things I've learned. One is that I I'm. always wrong when I bet against the US. consumer. So I suspect the consumer will. be more resilient than we think but. there will be something somewhere in the. further reaches of the financial system.

that we have not really realized is. vulnerable yet. What about the econ the. impact on the rest of the world though. because you you make a very interesting. argument. Your leader suggests that the. recession will be quite shallow but that. nonetheless it will have bigger global. impact than we might realize. Just talk. us through that. Uh yes. So uh if you. cross your mind back to April before the. AI boom got into full swing when it was. just tariffs and it was just the. institutional changes in the US the. institutional threats investors were. pretty worried about that and the.

narrative then was the end of US. exceptionalism. So I think that it's. quite plausible that you get those. return those kind of concerns. resurfacing a bit if the AI stock market. boom goes away. So whereas usually in a. recession you'd have this flight into. the US dollar. Well, I'm less convinced. that will happen this time because there. will be so many question marks over the. US and because the US will definitely be. taking a bigger growth downgrade than. everyone else. >> And will that make people at last be. less pessimistic about Europe? All I. hear is gloom and doom about Europe. everywhere.

>> Yeah, maybe a bit. I mean, that did. happen a little bit in the spring, but. unfortunately, you know, improves the. relative position without necessarily. improving the absolute position. It's. it's possible to have a weaker America. without uh Europe taking advantage of. it, but it will certainly look. relatively more attractive. He's got to. help with things like foreign investors, attracting talent and so on. >> And will there just one last question. from you uh Tom? You've I think long. argued as you did just now that you know. this is much like every other new. technology and it takes a while to. implement and so forth. But I've I've. been struck by the growing sort of.

clamor of concern about AI is taking all. of our jobs and there's a that's sort of. in the last few weeks in particular. seemed piece after piece after. Are we. going to hear more about that next year. particularly if the economy weakens? >> I think we'll whether it does or not. I. think if um because if the AI boom. continues then people will start blaming. things on AI um taking their jobs and in. fact there already are and if there's a. bust then um there will be cutbacks and. people will will say that companies will. justify it by saying well we found cost. savings using AI which is a kind of. classic way to try and reduce your your. share price at the moment. Um so I think.

there is going to be more concern about. this. The other thing the other piece of. this is AI agents and this is where you. package up AI in a form that's easier. for for companies to adopt and it kind. of makes more sense to the accounting. department. So agents that you know do. the job of a programmer or a customer. sales executive and so on and marketing. AI in that way. I just can't think of a. more effective way than uh than that to. scare people about the prospect of AI. taking their jobs and we are seeing more. and more of this concern about graduate. unemployment in particular being blamed. on AI. I think there's probably more to.

it than that and there are other. explanations but we honestly don't know. So it goes back to your original framing. thought which is in 2026 we're going to. get clarity on a lot of a lot of things. and I think that's one of them. we're. going to get more evidence on what's. really happening with AI at the bottom. rung of the ladder. >> I mean, we have another piece in the. finance section this week that points. out that recessions also tend to be. times when there is a lot of structural. change. So, you could get a phenomenon. where even if AI isn't causing the job. loss, it provides a bit of an impetus. for companies who are searching for cost. savings and the like to actually adopt. the technology and it pushes a pushes.

forward adoption a little bit. I think. that's quite plausible. >> Exactly. So, I think AI and jobs is back. on the agenda in 2026. [Music].