Alessio Rastani and Charlie Burton discuss whether AI could trigger a stock market collapse around 2027
Trader and market analyst Alessio Rastani discusses AI risks and stock market cycles with fellow trader Charlie Burton.
Summary
Alessio Rastani and Charlie Burton examine whether AI poses a genuine existential threat and whether it could be connected to a coming stock market downturn. Charlie takes an optimistic view on humanity's ability to solve the problems it creates, while Alessio acknowledges the warnings from AI insiders as credible. The central market argument is built around the Benner Cycle, which projects a stock market top at the end of 2026 — effectively 2027 — followed by a potential five-to-six-year bear market lasting until the end of 2032. Both hosts draw a parallel to the dot-com bubble, arguing that a transformative technology does not prevent a severe market correction, and that AI valuations could become divorced from stock prices just as internet valuations did in 1999–2000.
Key Takeaways
FULL TRANSCRIPT
AI Existential Risk — Are the Warnings Credible?
Alessio Rastani: Charlie, there's been a lot of stuff in the news recently. I'm sure you've seen it yourself. There have been warning signs. A lot of people in the AI industry — people working for AI companies like Anthropic and others — have been sounding warnings that within the next three to five years, or maybe ten years, but some of them are saying within a year, AI could take over humanity. I'll put a clip here so people can actually see it.
"This is all extrapolating — potentially one year away from now the models start getting very dangerous and we have to be very careful. One year away. Some people think even six months."
"The problem of controlling general superintelligence is not solvable. It is impossible to solve it. So if we build it, we don't control it. The outcome is bad."
Part of me thinks they could be right. But there are some people on the other side — like Steve Eisman, one of the guys from The Big Short — who is saying, "No, this whole Terminator scenario is nonsense."
Charlie Burton: Yeah, it's all nonsense. I think something else completely is going on here. First of all, there's no evidence at all that AI has achieved artificial general intelligence. But the idea that this whole Terminator thing is nonsense —
Alessio Rastani: I'll be personally honest with you, Charlie, and with everybody watching. I really think that the people out there who are sounding the warnings are correct. I think they're on to something, and I do think there is danger from AI. I don't know whether AI is going to take over humanity — I honestly don't know. The potential is there. I want to ask your opinion on this, but I also want to link it to the stock market. So first, are you with Steve Eisman? Do you think it's nonsense, this Terminator doomsday scenario?
Charlie Burton: I'm bullish the human race. I'll stay bullish the human race. We have an amazing capacity to solve problems.
Alessio Rastani: You're an optimist.
Charlie Burton: To the point that sometimes I honestly think — what drugs are you taking? But it's served me well to be cautiously optimistic over the years. If I was pessimistic all of the time about the stock market or whatever, I'd have been wrong. And there are a lot of pessimists out there — I'll leave all that to them.
I learned many years ago, about 25 years ago, I was doing a talk at the World Money Show and the Adams Institute were there as well. The guy from Adams — who are a big forward-thinking think tank — said at that point: if you study your history, your best bet is to bet in favour of the human race. Yes, there are going to be wars. Yes, there are going to be recessions and bear markets. But your best bet is to be cautiously optimistic. I took that on board 25-plus years ago and I still hold to it.
Because if AI was to bring about the end of the human race — well, I haven't got anything to worry about. If it happens, it happens. It's going to happen so quickly. It's a bit like nuclear war. What's the point in worrying about it? I might as well be positive about the good things that could happen with AI and around the world. Of course there are threats in the near term — of course there are. But I'm optimistic that mankind will solve the problems it creates, and that hopefully, long after you and I have left this earth, in another 300 years, mankind still occupies this earth. And if it doesn't, then it serves us right. The world will continue — so that's something to be positive about.
Alessio Rastani: One of the most pessimistic philosophers in history is Schopenhauer. If you're a pessimist, you'll love him. But I've also been reading Hegel — the Philosophy of History — and Hegel would absolutely agree with you on this point of looking back at history and learning from it. I wouldn't call myself a pessimist, just to be fair. The people who are sounding the alarm about AI and the potential that it might take over humanity — I don't think I could call them pessimists, because it seems to me they want mankind to survive this and be able to overcome it.
But I do see your point as well. When you hear these doomsday scenarios — "Oh my goodness, within a year or two we could all be annihilated" — you do think, "Really? For real?" It doesn't sound right somehow. And then what you just said — humanity has been able to —
Charlie Burton: Look at COVID.
Alessio Rastani: Yeah, exactly. In 2020 and all around that time, how many analysts were out there saying this is the doomsday scenario? And yet mankind seems to manage to solve issues time and time again. I'm just saying it's not worth investing my mental capital in worrying too much. Obviously you don't want to move along blindly, but I would rather be an optimist towards life. I'm talking about the analysts and people on social media who get really, really pessimistic. That's who I'm talking about. I think sounding an alarm is right — absolutely — but I would still like to remain optimistic.
The Benner Cycle and the Case for a 2027 Bear Market
Alessio Rastani: I want to link this back to the stock market. We know the Benner Cycle — I'll put it here so people can see it — is projecting a potential top at the end of 2026. The Benner Cycle was devised back in 1875 by Samuel Benner. He projected tops using both a minor cycle and a major cycle. His minor cycle has in the past worked out quite nicely. The Benner Cycle projected a top for 2007 — and that was absolutely correct, because that was the top before the recession and bear market. And I think it was back in 1999 as well — the dot-com bubble top — and that was also correct.
These dates, by the way, refer to the end of those years, not the beginning. So when you see 2026 on the Benner Cycle chart, it means the end of 2026 — which essentially means 2027. So if the Benner Cycle is projecting a top for the stock market in 2027, which I think is correct, that means this rally we're seeing in the stock market could potentially end next year.
The Benner Cycle also projects a bear market lasting from 2027 — or in other words the end of 2026 — to the end of 2032, meaning the beginning of 2033. So about a five-to-six-year bear market.
On that basis, if we're about to go into a multi-year bear market — and the Benner Cycle seems to project that, and there are other dangerous signals too — that seems to coincide with this whole AI doomsday scenario. Because usually in bear markets there is a backdrop of negative news. I'm not suggesting that news or fundamental events will cause a bear market — I'm not a mechanist. I don't think news events cause price action. I think it's actually the other way around. But there is going to be some kind of bear market in the next few years, and one that could be quite severe in my view. Could last many years. Not this year, not 2026 — from 2027 onwards.
If that's the case, it would make sense that there's some negative bad news out there. Some people are saying that even if AI does not take over humanity, it could cause such severe chaos. We've already seen recently AI hacking into governmental systems.
Charlie Burton: It could be purely valuation-led. What I mean by that is — Anthropic or OpenAI publicly list and their earnings aren't as good as the promise, and because prices come down as the market becomes more competitive, it's not quite as profitable as before. That ends up being the catalyst for the next bear market. So I can see something like that.
Alessio Rastani: Your scenario is the actual application of AI and what AI could do. I'm maybe a little bit different in that I can see a profit-led, so to speak, an overinvestment correction in the stock market — much like we had at the end of the 1990s with the internet bubble. I could see something very similar like that.
Charlie Burton: I just don't see — sorry — I just don't see the end of the world. That's it.
The Dot-Com Parallel — Technology Doesn't Prevent Bear Markets
Alessio Rastani: I'm glad you brought up the internet bubble. Some people today are using the AI narrative to justify why there can never be a bear market in the stock market. People are saying, "Oh, there can never be a bear market because of AI." But if you look at history — look at what happened in the late 90s. In 1999, people were saying the stock market could never crash because of the internet, the age of the dot-coms. But what they forgot was that these things can get divorced from each other. Price can get divorced from a new technology. Yes, we have the technology of the internet, but there still was a massive bear market — the NASDAQ crashed by around 80% after the dot-com bubble burst.
So the same thing could happen here with AI. You could have AI as a new technology which could transform the future — no doubt about that — but that is not the same thing as the stock market. The stock market can do its own thing. There could still be a massive bear market in the stock market regardless of AI technology.
Charlie Burton: No, I agree. And that's exactly what happened. The internet was the revolution, really, but it didn't mean to say that we didn't have a massive correction in stocks. I was trading through that in the early 2000s — that bear market. And it took the NASDAQ until what, 2013 or thereabouts, to get back to its pre-bear market highs. A bear market coming just because of AI doesn't mean to say that there won't be a bear market. It's exactly the same thing that people were saying back in 1998 and 1999 about the internet — that there can't possibly be a correction.
Alessio Rastani: Absolutely. And by the way, people were saying the same thing about the housing market in 2007 — that there was never going to be a housing market crash because it had never happened in history. And of course, that's exactly what happened.
As valuations continue and expectations of future growth remain elevated, there is always that potential bursting of those expectations, especially when valuations are already very high by historical standards. So that is a big risk to the stock market. It's just a case of the timing of that. And that's where things like the Benner Cycle come in — but the Benner Cycle, and a lot of these cycles as you know, they're not pinpoint. You can look back at it after the fact and say, "Yeah, it did come in, but it was sort of 12 months off or whatever."
Alessio Rastani: Exactly. Absolutely. And I should just say that some analysts — like Jay Kaeppel — have said that you should not use the Benner Cycle as a buy and sell signal. You should combine it with other technical tools. So just because the Benner Cycle says at the end of 2026 or beginning of 2027 there's going to be a top, that doesn't mean we just get out of the market — because as Charlie correctly said, these things cannot be precise.