Podcast Summary: The Indicator from Planet Money – "How to make $35 trillion ... disappear"
Date: December 11, 2025
Host: Darian Woods
Guest: Geeta Gopinath (former IMF chief economist, now at Harvard)
Overview:
This episode explores the risk of an “AI boom” bubble in the US stock market, drawing parallels to the dot-com crash. Darian Woods speaks with economist Geeta Gopinath about the immense growth in US tech stocks—specifically the “Magnificent Seven”—the rising risks of market overvaluation, and the potentially global consequences if a bust wipes out $35 trillion in wealth.
Key Discussion Points & Insights
1. Backdrop: Extraordinary US Market Growth
- Since the mid-2010s, the US stock market has dramatically outperformed other global markets.
- Geeta Gopinath [02:19]: “If you compare the performance of the US Stock market relative to other stock markets around the world, the US has been exceptional... the rest of the world also basically put a lot of their money in the US stock market.”
- In 2025 alone, the S&P 500’s value increased by 14%, primarily driven by US tech, especially seven key companies: Microsoft, Meta, Amazon, Apple, Google, Nvidia, and Tesla.
2. Concentration Risk in the "Magnificent Seven”
- A huge proportion of household, institutional, and foreign wealth is concentrated in these seven tech giants.
- Geeta Gopinath [03:30]: “A lot of people's savings are invested... in effect, [in] seven companies.”
3. Bubble Warning Signs: Record Price-Earnings Ratios
- The current price-to-earnings (P/E) ratio is the second highest in the last 100 years – only exceeded by the eve of the dot-com crash in 2000.
- Geeta Gopinath [03:42]: “It's the price to earnings ratio. This is now at the second highest level in the last 100 years.... The first highest level was just before 2000.”
4. What If the Bubble Pops?
- Using the dot-com crash as a template:
- Market could fall by 50-60% over two years
- US households would lose ~$20 trillion
- Foreign investors lose ~$15 trillion
- Total: $35 trillion could vanish
- Geeta Gopinath [04:35]: “We're looking at US households losing about $20 trillion in wealth and the rest of the world losing about $15 trillion.... these numbers are much larger than what it was 25 years ago.”
- Economic impact: US consumption could drop by 3.5%, GDP growth could fall to zero (effectively a recession).
- Darian Woods [05:48]: “So you're saying... the stock market would crash quite a bit and cause households to spend less. And that would translate into... a stagnant economy.”
- Geeta Gopinath [06:05]: “That is correct. Pretty close to recession, if not in recession... the effects could be bigger.”
5. Collateral Global Impact
- Europe is most exposed aside from the US due to its heavy investment in American equities.
- US recessions slow global economies, as American consumption is a key demand driver worldwide.
- Geeta Gopinath [06:24]: “When the US Goes into a recession, that pushes down growth prospects everywhere... US Consumers are a big source of demand for things that people produce elsewhere.”
- Governments are less able to counteract downturns today, due to high US debt (~120% of GDP) and high borrowing rates.
6. Should We Panic, or Is This Overblown?
- Timing a market crash is notoriously hard; gradual adjustments are possible.
- Investors should watch their level of exposure to the "Magnificent Seven" and consider diversification.
- Geeta Gopinath [07:59]: “Ideally, what we would like is there to be some adjustment that happens gradually over time.... The bigger problem is if there's a big crash.”
- Some capital is flowing to emerging and developing markets as US valuations climb.
- Geeta Gopinath [08:43]: “We are certainly seeing that there is more capital now going to other parts of the world... this has been a very good year for emerging and developing countries.”
7. Dinner Parties and Doomsaying
- Gopinath clarifies she is not a “doomsayer”, and most experts acknowledge her math is sound.
- Geeta Gopinath [09:16]: “I'm not trying to be a doomsayer. I think everybody I talk to agrees with the math. The math adds up. If you have a dot com crash, it's about 35 trillion.”
- The biggest question: Will AI investments generate the revenues to justify the exuberant valuations?
- Geeta Gopinath [09:40]: “Very large amounts of investments... are not coming along with a clear sense of where the revenues will come from.”
Notable Quotes & Memorable Moments
- Geeta Gopinath [03:42]: “It's the price to earnings ratio. This is now at the second highest level in the last 100 years.... The first highest level was just before 2000.”
- Darian Woods [05:48]: “So you're saying... the stock market would crash quite a bit and cause households to spend less. And that would translate into... a stagnant economy.”
- Geeta Gopinath [06:05]: “That is correct. Pretty close to recession, if not in recession.”
- Geeta Gopinath [09:40]: “The big question everybody has to ask is this. Very large amounts of investments that are happening in AI is not coming along with a clear sense of where the revenues will come from...”
Timestamps for Key Segments
- [02:19]: Background—US market outperformance; global investment in US stocks
- [03:22]: Concentration in "Magnificent Seven"
- [03:42]: Warning about high price-to-earnings ratios
- [04:35]: Hypothetical $35 trillion wealth destruction and economic impact
- [06:24]: Impact on Europe and the world, fiscal constraint in the US
- [07:59]: Uncertainty in timing, advice on diversification
- [08:43]: Emerging market flows increasing
- [09:16]: On being a “doomsayer”; the AI optimism puzzle
Tone & Style
The discussion is clear, analytical, and approachable. Gopinath avoids hyperbole, grounding her predictions in historical precedent and current data. Woods is curious, occasionally worried, but maintains a conversational tone.
Geeta Gopinath [10:06]: “The idea is to worry about something so that you can act on it and then you don't have to worry about it.”
This episode offers a concise but sobering exploration of the fragility underlying today’s euphoric stock market, emphasizing the importance of diversification and realism amid the hype of technological transformation.