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Economic commentator Scott Galloway, or Prof G, is warning 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 a recent 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.” 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).
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,” host Steven Bartlett said, “As 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.”
That’s not to say that’s China’s game plan, nor is it the ultimate point of Prof G’s argument.
Rather, it’s the idea that Americans are heavily invested in AI with few alternatives to protect them from a recession.
This begs the question: if 40% of big tech stocks crash, and you’ve committed to a 60/40 investment split, is today’s playbook really built for tomorrow’s economy?
