Motley Fool sees 2027 bear market risk, warns on AI spending

The warning comes after a multi-year bull run: the S&P 500 rose roughly 26% in 2023, 25% in 2024, and 18% in 2025, but sentiment is now cooling and a bear market could be on track for 2027. The core concern is whether generative AI capital spending is sustainable. A WSJ study cited in the piece suggests that by 2032, American businesses and consumers would need to spend the equivalent of 8.8% of the country's annual GDP on AI-related products and services to justify current spending levels—an amount the author calls extremely unlikely, since it exceeds energy spending and approaches food spending.

Beyond spending levels, margin-eroding competition from open-source models and low-cost Chinese rivals could limit revenue and profit potential for the big US tech firms. It also notes the changing US political climate could bring more regulation on data center construction and new energy projects, adding further risks.

As a counterweight, the piece points to Warren Buffett's Berkshire Hathaway holding a record $365.5 billion cash position, mostly in short-term Treasury bonds yielding over 4%, as an example of how to stay liquid and ready to act if stocks get cheaper. It also suggests recession-resistant areas like tobacco and consumer-essentials REITs. Finally, it invokes the COVID-19 crash—when the S&P 500 fell roughly 18% in 2022 before rebounding 26% in 2023—to argue that long-term investors should stay the course and be ready to react to any deals in the coming years.