# AI spending boom will reverse, dragging stocks and growth down

> Capital Economics warns that AI investment will slow next year then fall in 2028, taking the stock market and GDP growth with it.
- Title: AI spending boom will reverse, dragging stocks and growth down
- Summary: Capital Economics warns that AI investment will slow next year then fall in 2028, taking the stock market and GDP growth with it.
- Keywords: capital economics, vicky redwood, ai investment, s&p 500, gdp growth, stock market, ai capex, Fortune
- Source: Fortune — https://fortune.com/2026/11/08/stock-market-outlook-sp500-ai-capex-gdp-growth-productivity
- Author: Jason Ma
- Read time: 1 min
- Topics: capital economics, vicky redwood, ai investment, s&p 500, gdp growth, stock market, ai capex
## The AI spending surge is unsustainable
Hyperscalers will spend eight hundred billion dollars this year, double from last year, and invest an estimated one trillion or more in twenty twenty-seven.
## Revenue cannot justify the investment
Capital Economics Chief Economic Adviser Vicky Redwood calculated that AI revenues from external customers would need to explode by ten-fold by twenty thirty to justify all that spending.
## Investment will slow then fall sharply
Redwood expects AI investment to continue rising next year but at a slower pace, then fall outright in twenty twenty-eight by around ten percent.
## Stock market will price in the decline early
Redwood expects the S&P five hundred will be twelve percent below its current level by the end of twenty twenty-seven, putting it seventeen percent off its early October peak.

> We expect considerably larger falls in tech-heavy indices.
## GDP growth will slow but avoid recession
A ten percent capex drop might take zero point one percent off US GDP. Redwood wrote the bottom line is slower GDP growth in twenty twenty-eight but not a major downturn.
## AI productivity gains will continue
Despite the capex decline, AI will continue improving productivity through infrastructure already built and new investment at a slower rate.Redwood estimated AI will increase US productivity by about one percent per year for several years.
## Key takeaway

Capital Economics predicts AI investment will slow in 2027 then fall 10% in 2028, causing the S&P 500 to drop 12% by end of 2027 and trimming US GDP growth.