Will President Trump Crash the Stock Market? History Says This Could Come Next.

The article warns that the S&P 500's 27.6% gain since Donald Trump's November 2024 election could be vulnerable as Brent crude has risen 70% year-to-date, the Fed lifted its benchmark rate to 3.75%-4.00%, and the 10-year Treasury yield reached 5.2%. Higher rates, tariff-driven inflation, Iran-related shipping disruptions, and large AI capital requirements could pressure growth-stock valuations, particularly as OpenAI is projected to burn $280B by 2030. Investors are advised to diversify away from high-risk AI exposure toward stable, fairly valued companies.

Analysis

The relevant transmission is not a generic equity-risk-off event but a duration-and-capex squeeze: higher real discount rates lower terminal-value multiples while elevated power, equipment, and financing costs raise the cash-flow break-even point for AI infrastructure. The most exposed are levered or externally financed data-center, power-development, and pre-profit model businesses; established hyperscalers can self-fund longer, but their incremental ROIC becomes the key earnings-call fault line. Chinese open-source progress compounds this by weakening pricing power precisely as U.S. fixed-cost commitments accelerate.

Near term (days to weeks), the largest risk is crowded AI leadership unwinding if long yields rise further or if a major cloud provider cuts capex guidance. Over 1-3 months, focus on whether cloud revenue growth and utilization monetize fast enough to offset depreciation, energy, and interest expense; a broad market selloff is not required for AI-relative underperformance. Over 6-18 months, constrained grid capacity may create a less obvious beneficiary set: regulated utilities and gas-generation suppliers can retain pricing power even if GPU and model-layer economics normalize.

The contrarian point is that nominal-rate pressure alone is insufficient to short profitable mega-cap AI platforms: inflation-linked revenue, net-cash balance sheets, and enterprise productivity demand can absorb a moderate yield move. The cleaner expression is dispersion—short the highest-duration, capex-intensive AI beneficiaries against firms monetizing power and financing scarcity. GS is more mixed than the article implies: higher rates can support net interest income and trading activity, but a sustained IPO/M&A slowdown and credit deterioration would offset that benefit.

Key Decisions for Investors

• Do not initiate a directional GS position on this signal alone. Set a 1-3 month watch trigger: long GS only if investment-banking backlog and trading guidance remain resilient while credit-loss provisions stay contained; avoid/short on material provisioning acceleration or a sharp underwriting-fee reset.
• Express AI-duration risk as a 3-6 month pair: short an AI infrastructure/compute basket via SMH or selected high-multiple, capex-dependent names versus long XLU or a regulated-utility basket. Thesis breaks if the 10-year yield retraces materially and hyperscaler capex guidance rises alongside accelerating cloud revenue.
• Maintain tactical underweight on unprofitable AI and data-center developers for the next 1-3 months; require evidence of contracted power availability, customer prepayments, and positive project-level returns before covering. A dovish Fed pivot or financing spreads tightening would invalidate the funding-stress leg.
• For structural exposure, accumulate quality power-generation and grid beneficiaries on pullbacks over 6-18 months rather than chasing broad AI equities. Monitor electricity-forward prices, interconnection queues, and utility regulatory returns; easing power bottlenecks would reduce scarcity premiums.