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In an interview with CNBC, Mohamed El-Erian stated that the U.S. economy is “really levered” on AI right now.
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According to him, this leaves the market vulnerable to a broader downturn if the technology sector sells off sharply.
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He expects the Fed to raise rates at least once more, but does not see the three hikes currently priced in by markets materializing.
Mohamed El-Erian, chief economic adviser at Allianz, said on Thursday that the growing public backlash against artificial intelligence is a warning the U.S. should heed, but that investors are overreacting to it.
“I think we’re getting a warning, a timely warning, not to repeat the mistake of globalization,” El-Erian told CNBC. “The ‘let it rip’ policy leaves lots of people behind, and this is a reminder that we have to do this in a more thoughtful manner.”
Investors are waiting to see how AI and data center build-out will shape up after this week’s midterm elections, which handed Democrats control of both chambers of Congress.
After Wednesday’s rally, the markets were seeing a sharp correction in midday trade on Thursday. The Nasdaq plummeted 4.2% in midday trading, putting it on track for its worst session since April 2025 and pushing it more than 10% below the record it reached last month. The S&P 500 declined over 3%, while the Dow Jones Industrial Average dropped 1,153 points.
ETFs tracking the major U.S. stock indexes, the SPDR S&P 500 ETF Trust (SPY) and Invesco QQQ Trust (QQQ), were among the top-trending tickers on Stocktwits at the time of writing. Retail sentiment around both remained in ‘bearish’ territory over the past day, accompanied by ‘high’ levels of chatter.
El-Erian Sees AI Backlash, But Says Investors Are Overreacting
According to El-Erian, the market’s reaction to the political and public backlash has gone too far. “I think the market is overdoing it,” he said. “I think fundamentally we’re going to get smarter adoption of AI rather than no adoption of AI.”
However, he added that the backlash was not surprising, noting that the industry had not done enough to explain how AI could affect people’s jobs and daily lives, leaving the public to focus on the technology’s risks.
El-Erian compared the situation with globalization. “The globalization theme was a good one, but we didn’t pay attention to the distribution effects, and we got a massive backlash that has derailed globalization,” he said. “We do not want to derail AI for economic reasons and for national security reasons.”
