Top Economist Sees a Strong Investment Boom — But Warns These 4 Risks Could Trigger Next Market Shock

Renowned economist Nouriel Roubini sees a strong global investment boom led by artificial intelligence and other technologies, but he is watching four risks that could disrupt the U.S. economy and financial markets.

In an interview with Bloomberg’s Francine Lacqua in Cernobbio on Friday, Roubini pointed to the Strait of Hormuz, a possible escalation of the Iran war after the U.S. midterm elections, higher bond yields and a potential market correction as key risks.

Bond Yields Under Pressure

Roubini said the rise in real yields is being driven more by the capital expenditure boom than inflation expectations, although he acknowledged concerns about fiscal sustainability. He said stronger investment can also signal stronger economic growth.

Roubini had previously warned that inflation could return to 5%-6% and push the 10-year Treasury yield toward 8%, citing geopolitical tensions, government deficits and higher borrowing costs.

That concern is playing out alongside a sharp increase in corporate borrowing to fund AI infrastructure. Big Tech companies and their special-purpose vehicles are projected to issue about $320 billion of debt this year, adding pressure to the same pool of long-term investors that finances U.S. government debt.

Global bond markets have also been under pressure. The 10-year U.S. Treasury yield briefly reached about 4.8% last week, while Japan and the U.K. also saw major increases in long-term borrowing costs.

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Four Risks

Roubini said the Strait of Hormuz is currently "half open, half closed." He also warned that the Iran conflict could escalate after the midterm elections.

On fiscal policy, he said governments eventually need consolidation. Without it, he warned, bond yields could rise and pressure domestic demand.

Roubini does not view AI as a bubble. "That's not my view. I think it is a secular increase in CapEx and potential growth, but some corrections could occur," he said.

He also said the AI and data-center buildout is increasing labor demand in the short term, while job displacement is more likely to become a medium- or long-term concern.

Roubini remains optimistic about the broader investment cycle, pointing beyond AI to semiconductors, defense, quantum computing, biotechnology, space and other emerging technologies.

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