Panmure Liberum strategist warns AI bubble could drag S&P 500 to 5,000

Joachim Klement thinks the AI party is running on borrowed time. The head of market strategy at Panmure Liberum is warning that the current AI investment boom looks like a bubble, and that it is likely to burst sometime between 2027 and 2028. His target for the S&P 500 is 5,000 by the end of 2027. With the index recently trading around 7,723, that implies a drop of more than 35%. The math behind the bearish call Klement laid out the projection in his latest forecasts, published in October 2026. The pessimism is not limited to Wall Street: he expects European and UK equities to suffer as well. His core argument is about cash. Free cash flow at the biggest hyperscalers is shrinking, according to Klement, while the debt costs tied to their capital spending keep climbing. The spending in question is concentrated in a handful of US giants: Amazon, Microsoft, Alphabet, Meta, and Oracle. Panmure Liberum’s analysis from May 2026 put their combined 2026 capex at $658 billion. To justify that outlay, Klement estimates those five firms would need to add $2-5 trillion in annual revenue. Outside estimates point the same direction. Bloomberg Intelligence expects data-center spending to surpa...