The Indicator from Planet Money

How to make $35 trillion ... disappear

December 11, 2025

Key Takeaways Copied to clipboard!

  • A dot-com style crash in the current AI-fueled stock market could erase an estimated $35 trillion in global wealth, with US households losing $20 trillion and the rest of the world losing $15 trillion. 
  • Such a crash, mirroring the dot-com bust's 50-60% market fall over two years, could cause US consumption growth to drop by 3.5%, leading to US economic growth coming to a standstill (a 2% drop from its typical growth rate). 
  • Unlike the dot-com crash, the US government has limited fiscal capacity to cushion a potential crash now due to current high national debt (about 120% of GDP) and high borrowing rates. 

Segments

AI Boom vs. Dot-Com Crash
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(00:00:11)
  • Key Takeaway: The current AI-fueled stock market boom is being compared to the dot-com crash, but Gita Gopinath warns a similar bust could be worse.
  • Summary: The AI boom is drawing comparisons to the late 1990s dot-com crash, which saw the US stock market drop about 50% from its peak. Former IMF Chief Economist Gita Gopinath has modeled the potential economic impact of a similar bust today. This analysis is the central focus of the episode of The Indicator from Planet Money.
US Market Outperformance Context
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(00:02:50)
  • Key Takeaway: The US stock market has shown exceptional performance over the last 10-15 years, attracting significant global investment.
  • Summary: Over the last decade and a half, US stock market performance has significantly outperformed global markets, making US equities a ‘one-way bet.’ The S&P 500 has grown another 14% in value since the start of 2025. This growth is largely driven by the dynamism of US tech, specifically the Magnificent Seven stocks, which account for about 40% of the valuation increase.
Valuation Concerns and Crash Scenario
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(00:04:21)
  • Key Takeaway: The current Price-to-Earnings (P/E) ratio is at its second-highest level in 100 years, second only to the peak before the 2000 dot-com bust.
  • Summary: The high CAPE ratio signals elevated valuations that warrant caution, though it does not predict an immediate crash. If a crash mirroring the dot-com bust occurs, it would wipe out $20 trillion in US household wealth and $15 trillion globally. This wealth destruction would translate to a 3.5% drop in consumption growth, effectively bringing US economic growth to a standstill (a 2% drop).
Global Spillover Effects
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(00:07:01)
  • Key Takeaway: Europe faces the highest direct exposure to a US equity crash, while the entire world faces slower growth due to reduced US consumer demand.
  • Summary: European economies are expected to be hit hardest due to their greater exposure to US equities compared to emerging economies. Globally, a US recession slows growth prospects because US consumers are a major source of demand for goods produced worldwide. Furthermore, the US government has less room to increase spending to stabilize the economy now due to high existing debt levels.
Mitigation and Diversification Advice
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(00:08:18)
  • Key Takeaway: Investors should pay closer attention to valuations and diversify portfolios away from heavy reliance on the seven major tech stocks.
  • Summary: While pinpointing a correction date is difficult, a gradual adjustment is preferable to a large crash. Investors are advised to monitor company valuations and diversify their portfolios, especially given the heavy concentration in the Magnificent Seven. Capital is already beginning to flow more toward emerging and developing markets as US stocks become relatively expensive.
Concluding Thoughts on AI Investment
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(00:09:54)
  • Key Takeaway: The primary uncertainty surrounding the AI boom is the lack of a clear revenue path to justify the massive current investment levels.
  • Summary: Gopinath confirms the $35 trillion math for a dot-com style crash is accurate, though some remain optimistic. The core financial question remains how the revenues generated will eventually support the very large investments currently being poured into AI development.