Stocks will tumble much further as AI investment will slow next year then fall in 2028 and drag GDP down too, economist predicts

Investors facing recent losses may have more volatility ahead as the artificial intelligence investment boom begins to weaken, according to Capital Economics.

The economic research firm expects AI investment to slow next year before declining in 2028. Its forecast points to a longer period of pressure for markets that have been influenced by expectations surrounding the expansion of AI spending.

Why the forecast matters

A reduction in AI investment could affect the stock market by weakening one of the themes that has supported investor interest. Capital Economics says the resulting market damage could be significantly larger than the losses investors have already experienced.

The forecast also extends beyond financial markets. The firm expects the decline in AI investment to weigh on gross domestic product, meaning the investment pullback could have broader economic consequences.

What lies ahead

The outlook identifies two stages: slower AI investment next year, followed by a fall in 2028. That timeline suggests the potential impact would not be limited to a short-term market reaction.

Capital Economics’ assessment is a forecast rather than a confirmed outcome. Still, it highlights the risk that a cooling AI investment cycle could pressure both stocks and economic growth. Investors are therefore facing the possibility of further market losses as the boom loses momentum.