Global Market | AI boom, market correction risks emerge as major credit threats: Fitch

The artificial intelligence boom and the possibility of a sharp market correction have emerged as major global credit risks, ratings agency Fitch warned, highlighting concerns that soaring technology valuations and unprecedented AI-related spending may be outpacing uncertain future returns, as per a Reuters report.

In its third-quarter Global Risk Outlook, Fitch said the global credit environment is facing two key near-term risks: growing vulnerability to an AI-driven market correction and continued uncertainty arising from the U.S.-Iran conflict.

According to Reuters, Fitch’s assessment comes amid rising concerns among global financial watchdogs that the AI investment cycle has become increasingly linked with economic growth and capital markets, particularly in the United States. The agency said the scale of AI-related spending has created significant exposure for economies and markets if valuations face a sharp reversal.


Valuations Near Dotcom-Era Levels
The warning comes as investors remain increasingly cautious about the sustainability of the AI-driven rally, with AI-linked stocks across Asia coming under pressure amid concerns over funding requirements, profitability and intensifying competition from China.

Fitch noted that the cyclically adjusted price-to-earnings ratio of the U.S. S&P 500 has risen close to levels witnessed during the late-1990s dotcom boom. The agency also highlighted that U.S. corporate bond issuance jumped 26% in the first half of 2026, largely supported by fundraising linked to artificial intelligence investments.

The ratings agency estimated that Amazon, Alphabet, Nvidia, Meta, Oracle and SpaceX collectively raised $182 billion through investment-grade bond issuance. Meanwhile, capital expenditure by Alphabet, Amazon, Meta and Microsoft is expected to surge more than 75% this year to $700 billion, Fitch said.

Fitch estimated that strong technology investment contributed 1.4 percentage points to U.S. GDP growth in the first quarter of the year. Rising equity markets have also supported consumer spending by boosting household wealth.

However, the agency warned that uncertainty around future AI revenues, regulatory changes, competitive pressures and labour-market disruptions could trigger a prolonged market correction with broader economic consequences.

Geopolitical Risks Add to Credit Concerns
Beyond AI-related risks, Fitch identified geopolitical tensions as another major challenge, particularly due to renewed fighting between the United States and Iran and disruptions around the Strait of Hormuz.

Reuters reported that Fitch expects global economic growth to slow to 2.4% in 2026, while forecasting U.S. inflation to end the year at 3.7%, partly due to the impact of higher energy prices.

The agency also flagged a strong El Niño weather pattern as an emerging credit risk, warning that droughts, floods and severe storms could worsen inflationary pressures and disrupt economic activity.

Fitch said the combination of climate-related shocks and geopolitical tensions could create additional challenges for highly indebted and lower-rated economies. Rising food prices could complicate monetary policy decisions, increase government subsidy burdens and put further pressure on public finances.

Emerging Markets Face Additional Pressure
Fitch highlighted risks for Latin America, where higher fertiliser and diesel costs could weigh on agricultural and transport sectors. The agency noted that fertiliser and diesel account for a significant share of agricultural input costs in the region, while a substantial portion of fertiliser supplies comes from the Middle East, Reuters reported.

Higher costs and weaker agricultural output could pressure agribusiness profitability and affect transport-related industries, including ports, railways and toll-road operators, Fitch warned.

The ratings agency’s outlook underscores the growing challenge for policymakers and investors as the global economy becomes increasingly dependent on AI-driven investment, while facing heightened geopolitical and climate-related uncertainties.