All-In On AI: What Happens If the Bubble Pops In 2026? - SPDR S&P 500 (ARCA:SPY)

Core Viewpoint - Apollo Global Management warns that the U.S. economy is overly dependent on artificial intelligence as its primary growth engine, creating a "single point of failure" risk for the economy [1][4]. Group 1: Market Concentration - The S&P 500 has seen unprecedented concentration, with the 10 largest companies now accounting for over 40% of the index's total market capitalization, largely driven by the AI narrative [2]. - The SPDR S&P 500 (NYSE: SPY) has increased by nearly 18% this year, primarily due to AI-related investments [3]. Group 2: Capital Expenditure Trends - Hyperscalers such as Microsoft, Google, Meta, Amazon, and Oracle are projected to allocate a record 60% of their operating cash flow towards AI infrastructure capital expenditures [2]. Group 3: Economic Impact of AI - AI-related investments contributed more to U.S. GDP growth than consumer spending in 2025, indicating that AI has become a crucial lifeline for the U.S. economy [3]. - Apollo predicts that if AI demand weakens or capital expenditures do not yield immediate productivity gains, it could lead to significant negative consequences for the economy [4]. Group 4: Potential Risks of AI Dependency - A sharp decline in the performance of the top companies, referred to as the "Magnificent 7," could trigger a broader market correction, potentially resulting in a 20-30% drop that could erase years of gains [5]. - A downturn in AI sentiment could halt data center construction and chip orders, leading to an infrastructure freeze [5]. - The loss of AI investment could push the U.S. economy into recession, with a consensus recession probability of 30% for 2026 [5].