Andrew Ross Sorkin warns stock market crash echoes 1929 Wall Street patterns, AI bubble concerns mount

Financial journalist Andrew Ross Sorkin has spent nearly a decade analyzing the 1929 stock market crash and identifies troubling parallels between Wall Street conditions then and market dynamics today. Sorkin’s research, detailed in his forthcoming book “1929: Inside the Greatest Crash in Wall Street History, and How It Shattered a Nation,” releasing October 14, examines how record market highs preceded the Great Depression.

Artificial intelligence and technology sectors have driven significant market gains in recent years. Sorkin questions whether AI investments represent sustainable growth or temporary market inflation, CBS News reported.

“I just can’t tell you when, and I can’t tell you how deep,” he said. “But I can assure you, unfortunately, I wish I wasn’t saying this, we will have a crash.”

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Despite a market decline Friday, October 10, Wall Street stocks have increased substantially in recent months. Some investors express concern about overvalued stocks. Sorkin characterizes the current period as a new roaring 20s, with the 2020s mirroring the 1920s pattern of stocks reaching record highs, according to CBS News.

“I’m anxious that we are at prices that may not feel sustainable. And what I don’t know is we are either living through some kind of remarkable boom and part of that’s artificial intelligence and technology, and all of that, or everything’s overpriced,” he said.

Wall Street 1929 parallels: Credit expansion and market speculation

The 1929 market operated on rampant speculation, with ordinary investors unaware of mounting risks and heavy borrowing practices. Wall Street bankers encouraged modest-income investors to purchase stocks using credit through margin buying, requiring only 10 per cent down payment with the remainder borrowed from banks.

Before 1919, most Americans avoided credit and debt due to religious and moral perspectives on borrowing. General Motors changed consumer behavior in 1919 by offering loans for car purchases, transforming American shopping habits.

“And then the bankers realize what’s happening, and they realize that they can lend out money so that more folks can buy stocks. It was all sort of wrapped in the flag of democratizing access,” Sorkin said. “And in good times, when the stock is going up, it’s like free money. In bad times, you’re on the hook, and you’re on the hook in a very bad way.”

Currently, hundreds of billions in AI investments flow through markets, with investment professionals warning of a possible bubble as stocks reach elevated valuations amid economic uncertainty, including Friday’s decline following US President Donald Trump’s China tariff threats.

“I think it’s hard to say we’re not in a bubble of some sort,” Sorkin said. “The question is always when is the bubble going to pop?”

Financial regulations weakening as market speculation increases

Following the 1929 stock market crash, frightened traders sold stocks as investors lost businesses and homes. Subsequent years brought laws, regulations and agencies designed to protect investors.

Sorkin notes some protective barriers are being removed. Securities and Exchange Commission rules have become less stringent, CBS News reported.

“That’s what concerns me,” Sorkin said. “It’s not that we’re going off a cliff tomorrow. It’s that there’s speculation in the market today, there’s an increasing amount of debt in the market today, and all of that’s happening against the backdrop of the guardrails coming off.”

These guardrails include restrictions limiting direct investment in private companies with fewer regulations, such as AI startups before public offerings, to wealthy investors only.

Recent decades showed private equity and venture capital investors outperformed those without such access. These assets, typically restricted to wealthy investors, offer potentially higher rewards with increased risk.

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“Public companies, after the SEC was created, were required to have all sorts of disclosure rules so that the public could understand what’s going on inside them. Private companies don’t have that,” Sorkin said. “But historically, the average ordinary American wasn’t really allowed to invest in the private companies. But in this flag of democratizing finance, there’s a lot of people who want access to that.”

Some perceive elite investors have superior access while others lack early opportunity entry, Sorkin said. Both the Trump administration and financial sector have pushed to open markets to broader participation.

Such changes would require moving guardrails protecting consumers.

“They have protected a lot of people, but some people would say they protected people from getting rich,” Sorkin said.

Democratizing finance: 401(k) private investment access expansion

BlackRock CEO Larry Fink’s latest annual investor letter suggested opening retirement 401(k) accounts to riskier private investments under democratizing finance principles. He identified AI and data center investment opportunities, according to CBS News.

Current regulations preclude money managers from investing in such assets within many retirement products, but the Trump administration is changing those rules, Fink explained.

New investment opportunities carry risk.

“But everything is risky other than keeping your money in a bank account overnight,” Fink said.

Fink, who previously called bitcoin the domain of money launderers and thieves, now advocates adding cryptocurrency to investment portfolios.

“The markets teach you, you have to always relook at your assumptions,” he said. “There is a role for crypto in the same way there is a role for gold, that is, it’s an alternative.”

Also read: Wall Street selloff raises worries about market downturn

He views cryptocurrency and AI as portfolio diversification opportunities.

Cryptocurrency speculation risks mirror 1929 market conditions

Sorkin warns certain crypto products, including meme coins, enable abuse similar to 1929 patterns, with speculators inflating cryptocurrency values before crashes. Sorkin experienced this personally during a television appearance with Fink.

“He makes a joke, I think, about how there should be a Sorkin coin. Well, two hours later, somebody makes a Sorkin coin. And all of a sudden, this Sorkin coin is now worth millions of dollars. And I’m watching it,” Sorkin said.

The Sorkin coin peaked at $170 million in daily trading volume.