A market strategy chief at a London investment bank has issued a stark warning to investors: the AI trading boom may soon end, potentially triggering the worst market crash since the global financial crisis.

Global stock markets have hit record highs this year, driven by optimism over surging AI infrastructure spending. But Joachim Clement of Panmure Liberum said his base case is that this rally unravels as early as 2027, sending stocks sharply lower. "My core judgment is that the AI bubble will burst in 2027 or 2028, meaning at some point within the next two years," Clement said in an interview.

He said free cash flow at major cloud service providers is essentially exhausted, while debt costs are rising rapidly, making it unbearable for such companies. Clement's end-2027 target for the S&P 500 of 5,000 points implies a 36% decline from current levels. Among seven strategists tracked by Bloomberg, this is by far the most bearish forecast; the rest expect the index to gain about 14% on average. Clement expects the European Stoxx 600 to fall to 430 points, a drop of more than 30% from current levels.

The strategist, who began his career at UBS Group more than two decades ago, is one of the earlier voices predicting the end of this stock market bull run. As recently as mid-September, his core assumption was that the S&P 500 would reach 8,300 points by the end of next year. His shift in view stems from concern that stubbornly high inflation and the associated rise in financing costs will drag down the AI infrastructure investment boom.

Rohit Sipahimalani, chief investment officer of Temasek International, also issued a similar warning this week, saying a reversal in the AI trade is a major risk facing global markets. According to institutional estimates, data center capital expenditure by major cloud service providers in 2026 will more than double from last year to $713 billion. That figure is expected to keep growing next year, though at a slower pace, and is also an important support for U.S. tech earnings forecasts. "The market is now focused on only one thing, and that is earnings, especially tech earnings. Any macro, credit or other negative factor can be explained away by this story," Clement said.

Citigroup strategists said this week that despite higher rates and geopolitical risks, solid earnings in 2027 can still support global stocks continuing to rise. Clement acknowledged that his bearish call may be premature; through the end of 2026, he remained the most optimistic among Bloomberg-tracked strategists on the Stoxx 600, forecasting a gain of about 10% for the European benchmark. "What I am now warning everyone about is a risk I judge may only materialize in six to nine months," he said.

The strategist does not advise clients to sell now, but rather to prepare contingency plans and timing tools to identify signals that a crash is beginning. His top recommendation: once the S&P 500 falls below its 200-day moving average, shift fully to defensive positioning. That technical indicator takes the average of the index's closing prices and is used to gauge long-term market trends. When that happens, he recommends allocating to highly defensive sectors such as food, tobacco and pharmaceuticals. "I want to tell everyone that you should prepare now. You need to draw up a contingency plan now for the market turning into a bear market," Clement said.