TS Lombard has modeled a potential $20 trillion decline in equity markets if the AI investment boom unravels alongside a mild recession. Credit markets already show stress at some heavily indebted AI infrastructure firms, led by CoreWeave. Economist Dario Perkins does not expect a wider economic meltdown.
TS Lombard has modeled a potential $20 trillion decline in equity markets if the AI investment boom unravels alongside a mild recession.
The scenario arrives at an awkward moment. Credit markets are already flashing warnings about some of the most indebted players in the AI buildout, and stocks tied to the trade just had a rough week.
Even AI skeptics are fully invested
TS Lombard economist Dario Perkins argues the debate on Wall Street has moved past whether AI is a bubble. According to Perkins: "Even the AI sceptics are fully invested."
Last week offered a preview of what an unwind could look like. Neoclouds, the specialist companies that rent out GPU computing power for AI workloads, shed a fifth of their value over five trading sessions. The Nasdaq posted its worst week since Liberation Day.
CoreWeave's credit prices signal stress
The sharpest stress showed up at CoreWeave, one of the most prominent neocloud operators. Credit default swaps work like insurance policies that pay out if a borrower fails to repay its debt, and CoreWeave's five-year CDS tells the story. In mid-October 2026, the contract reached highs between 1,100 and 1,194 basis points, levels that implied a 60% to 63% likelihood of default over five years.
The bond market told a similar story. CoreWeave's unsecured bonds yielded near 15%, and their prices slipped below 80 cents on the dollar as of October 15, 2026. The company carries approximately $50 billion in debt. Its shares have recently dropped around 15% to 25%.
A revenue loop that feeds itself
The deeper worry in TS Lombard's analysis is structural. The firm notes that about 85% of revenues within the AI ecosystem come from recycled capital expenditure among large tech companies and related firms.
The vulnerability appears if financing tightens or if businesses and consumers outside the circle fail to pay for AI at scale. In that case, spending could slow at once, and revenue across the chain would fall together.
Perkins does not expect a full-blown meltdown
Perkins stops short of predicting economic catastrophe. He argues the likely outcome is not a balance-sheet recession across the wider economy, and that a downturn tied to an AI unwind would likely remain contained.
The $20 trillion figure, in other words, rests on a mild recession, not a severe one.
Source: Crypto Briefing
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