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Earlier in 2026, economic commentator and professor Scott Galloway, or Prof G, warned that with about 40% of the S&P 500 tied to AI-focused businesses, investors may need to reevaluate their risk exposure or prepare for a portfolio wipeout.
“There’s no way they can justify these incredible valuations,” Galloway said on an episode of The Diary of a CEO podcast (1). He also noted that one of the greatest threats to American AI companies is cheaper Chinese alternatives.
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He explained that the “majority of GDP growth over the last two years has come from AI,” and that if that slows, the U.S. would plunge into a recession “immediately.”
Data from the Federal Reserve Bank of St. Louis backs this up. The Fed found that 39% of total GDP gains in the third quarter of 2025 were driven by AI growth in areas such as software, R&D, information processing technology and data center construction (2).
This trend appears set to continue. Goldman Sachs estimates that AI investment spending could account for 40% of S&P 500 earnings growth in 2026, while major cloud companies are expected to collectively spend $674 billion on capital expenditures this year alone (3).
Plus, the S&P 500 has continued to notch fresh record highs in 2026, fueled largely by strong earnings from so-called megacap AI-related companies (4).
These sound like good things, but there’s a problem: For decades, Americans could build wealth simply by buying broad index funds and waiting. Now, in a K-shaped economy, with the wealthy at the top and the poor at the bottom, investors who haven’t kept up with the times are increasingly exposed to market weak spots.
“If you’re China,” podcast host Steven Bartlett said, “As [a] leader now, you go, you know what? Give Americans cheap AI, and you’ll kneecap their economy.”
“One hundred percent. That’s what I would do,” Galloway agreed. “Founders get quite scared that there will be an economic crash in the next 12 or 24 months because of overinvestment in AI.”
