AI Boom Cools: Wall Street Bear Warns of US Recession, Stock Market Volatility

Renowned hedge fund manager Leon Cooperman has issued another warning to investors, predicting that the US economy may fall into recession within the next year.

Cooperman, who previously served as CEO of Goldman Sachs, told CNBC in an interview that the market is showing multiple signals similar to past cycles of boom and bust, such as the "Nifty Fifty" era in the mid-20th century. He believes the current economic cycle may be nearing its end, with the cooling of the AI boom potentially triggering market volatility and impacting the stock market.

"I think we will fall into a recession at some point next year, and that could cause the market to decline," he said, also pointing out that he believes there is mispricing in the S&P 500 earnings estimates.

According to the latest data from FactSet, the S&P 500's earnings growth rate for the current quarter is expected to exceed 50%, marking the highest growth rate since the stock market's boom during the pandemic.

Cooperman's views are in the minority on Wall Street. Most forecasters remain bullish on AI demand and believe that AI investments will ultimately yield good investment returns. Despite recent rotation in AI investment themes, the Nasdaq 100 index is still expected to achieve double-digit growth this year, with the index currently up approximately 19% from January levels.

On the other hand, the US economy has shown resilience this year. According to economists at the Atlanta Federal Reserve, the US GDP growth rate for the third quarter is estimated at 4.3%.

However, Cooperman noted that investors seem to be overlooking a key threat: rising inflation. He pointed out that oil prices have recently risen again.

Brent crude oil, the international benchmark for oil prices, closed at $89 per barrel on Monday (17th), 22% higher than levels before the outbreak of the Iran war.

Under high inflation pressure, US consumers are beginning to tighten their purse strings. Data from the US Department of Commerce shows that retail sales in July fell 0.6% month-on-month, far below the market's expected 0.1% increase.

Cooperman stated that rising inflation also poses a risk to stock prices. He cited the rise and fall of the "Nifty Fifty" stocks in the 1970s, when oil prices surged significantly.

Discussing the current investment environment, Cooperman said, "The three most dangerous words in the investment field are: 'This time is different.'"

He further stated that he currently holds a bearish stance on the overall market, particularly avoiding technology stocks. He also hinted that if the market encounters a negative catalyst, investors may engage in large-scale stock sell-offs.

"What I find interesting is that everyone is bullish. As soon as negative news comes out, they will sell stocks," he said.

Despite other forecasters continuing to increase their exposure to AI investment themes and raise their targets for the S&P 500, Cooperman remains a well-known bear on Wall Street. Earlier this year, he also told Fox Business Network in an interview that the current market shows similarities to past asset bubbles and predicted that the US could fall into a recession as early as the end of 2026.