How to make $35 trillion ... disappear

Summary

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)

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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.

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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.”

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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...”

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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

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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.”

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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.

Transcript

[NPR Announcer]

Npr.

[Darian Woods]

The AI boom has had a lot of people comparing this moment tothe.com crash. That's when the US stock market boomed on the promise of the Internet but then dropped about 50% from its peak. Geeta Gopinath is the IMF's former chief economist and second in charge. She's now at Harvard. And Geeta has gamed out what a dot com style bust would actually mean for the economy.

[Geeta Gopinath]

Today we're talking about growth basically coming to a standstill in the US this.

[Darian Woods]

Is the indicator from Planet Money. I'm Darian Woods. Today on the show, a conversation with Geeta Gopinath about the possible erasure of $35 trillion from the global economy.

[Sponsor/Advertisement Voice]

Support for NPR and the following message come from Warby Parker, the one stop shop for all your vision needs. They offer expertly crafted prescription eyewear plus contacts, eye exams and more for everything you need to see. Visit your nearest Warby Parker store or head to warbyparker.com this message comes from Capital One. Say hello to stress free subscription management. Easily track block or cancel recurring charges right from the Capital One mobile app. Simple as that. Learn [e-mail] Subscriptions terms and conditions apply. Support for NPR and the following message come from Edward Jones. What does it mean to live a rich life? Maybe it's full of brave first leaps, tearful goodbyes and everything in between. And with over a hundred years of experience, your Edward Jones financial advisor can help. Edward Jones member SIPC economist Geeta Gopinath.

[Darian Woods]

Joined me from her Harvard recording studio late November.

[Geeta Gopinath]

So I think we have all the gadgets we need.

[Darian Woods]

Looks like a very serious microphone there.

[Geeta Gopinath]

Yes.

[Darian Woods]

So today I want to explore how the US Stock market could mean trouble for the rest of the world. And to set the scene, can you describe what's been behind the US stock market's pretty big increase over 2025?

[Geeta Gopinath]

If you want to understand what's happening in the US stock market, I think it also helps to go back about 10 to 15 years, which is that if you compare the performance of the US Stock market relative to other stock markets around the world, the US has been exceptional. So it was a one way bet in terms of putting money in US Equities. And so that's what happened was not just US Households and firms put their money in the stock market, but the rest of the world also basically put a lot of their money in the US stock market. So that's how 2025 started. Now since then it's grown by another 14% in terms of the value of the S&P 500. So it's a strong stock market. What's underlying that is the dynamism of US tech. So if you take the Magnificent Seven, which is the seven big tech stocks, that drives about 40% of this increase in valuation that we've been seeing over the last many years.

[Darian Woods]

The magnificent seven companies are Microsoft, Meta, Amazon, Apple, Google, Nvidia and Tesla. They're investing heavily in AI.

[Geeta Gopinath]

A lot of people's savings are invested one in the US stock market and therefore ineffectively. Seven companies.

[Darian Woods]

So what's keeping you awake at night?

[Geeta Gopinath]

If we look at some numbers. So I'll give you one number which is looking at the ratio of the price of of stocks to the earnings of companies. It's the price to earnings ratio. This is now at the second highest level in the last 100 years. So the first highest level was just before 2000. So it was just before the so called dot com bust when we had a crash. The valuations are really high and that gives you some pause.

[Darian Woods]

Yeah, this is the Cape ratio. We've actually talked a bit about this on the show before.

[Geeta Gopinath]

Indeed. Now that doesn't mean that there's going to be a crash tomorrow or in six months, but it does tell you that the valuations are high.

[Darian Woods]

And so if the American stock market is in some kind of bubble and it pops, what's a scenario that might happen?

[Geeta Gopinath]

One useful way to think about this is to compare this to what happened after the dot com bust, right when you had in 2000 a large stock market crash. So over two years the stock market fell by like 50, 60% cumulatively over a two year period. So if something similar were to happen this time round, given the scale of wealth that's now invested in the US stock market, we're looking at US households losing about $20 trillion in wealth and the rest of the world losing about $15 trillion in wealth. Now these numbers are much larger than what it was 25 years ago. So if you take that number and then you translate that into what typically happens to consumption, you could see consumption growth dropping by 3 1/2 percent, which then means US economy as a whole, that growth dropping by 2%. And just to keep some numbers in mind, the US economy tends to grow around 2%. So just through this channel we are talking about growth basically coming to a standstill in the us.

[Darian Woods]

So you're saying if the stock market were to do what happened in the dot com bust, the stock market would crash quite a bit and cause households to Spend less. And then that would translate into going from a growing economy to a stagnant economy.

[Geeta Gopinath]

That is correct. Pretty close to recession, if not in recession. And this is, I'm actually giving you some pretty conservative numbers. I think the effects could be bigger.

[Darian Woods]

And so it's interesting that this is a US Problem with huge US effects. What could that look like for other countries?

[Geeta Gopinath]

Those who would be hit most are Europeans because they are the ones who are actually exposed to US equities much more than, say, developing economies, emerging economies, or so on, so forth. So there will be spillovers to them too. But we know this, that when the US Goes into a recession, that pushes down growth prospects everywhere because it remains the case that US Consumers are a big source of demand for things that people produce elsewhere, everywhere in the world. So that's going to slow down economies globally, even for the US I would say that it's getting increasingly harder to ride out crises because when the dot com crash happened, the US government increased its spending by a lot. And that helped. Right. The economy. Right. It helped stabilize the economy and prevent things from getting worse. But right now, because US debt is about 120% of GDP and the rates at which they're borrowing are high, it's not easy to simply go and increase spending.

[Darian Woods]

So you've succeeded in scaring me quite a lot. But on the flip side of this argument, could it be premature to raise an alarm over a potential bubble? Is it possible that investors will miss out on huge gains if, for example, AI is as transformative as promised?

[Geeta Gopinath]

I think we should all be humble about the fact that it's hard to precisely pinpoint when you may have a correction in the market. Right. Ideally, what we would like is there to be some adjustment that happens gradually over time. If it happens slowly, it's okay. The bigger problem is if there's a big crash. And so I think it's not a bad idea for everybody to pay a little more attention to valuations of companies to see how much of their portfolio is dependent on these seven stocks and maybe diversify some.

[Darian Woods]

And are we seeing other countries starting to reduce their exposure to the US as well?

[Geeta Gopinath]

We are certainly seeing that there is more capital now going to other parts of the world. Part of that reason is because there is a sense in which US Stock markets are so high in terms of their price, they become very expensive. So in fact, this has been a very good year for emerging and developing countries. You've seen capital go into those markets much more than they did in 2020. 4.

[Darian Woods]

So when you're at dinner parties, how do people react to your scenarios of potential doom?

[Geeta Gopinath]

So firstly, 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. That is indeed correct. There are some people who are more optimistic about how things may play out and they could well be right.

I think 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 to make up for all these very large amounts of investment.

[Darian Woods]

Well, Geeta Gopinath, you have left me more worried than when I started, but thank you so much for joining the Indicator.

[Geeta Gopinath]

Thank you, Darian. The idea is to worry about something so that you can act on it and then you don't have to worry about it.

[Darian Woods]

This episode was produced by Cooper Katz McKim with engineering by Robert Rodriguez. It was fact checked by Sierra Juarez Cake and Cannon edits the show and the Indicator is a production of npr.

Hey, it's Darian woods here. I just want to take a moment to talk about the vital role of public media. It was founded to provide news and information to everybody for free, regardless of anybody's ability to pay. We still believe in the mission of public media at npr, but as of this fall, federal funding for public media, including NPR and local NPR stations, has been eliminated. Despite that, we remain committed to this work to go beyond the headlines to show you how the economy affects your life. Just this year, we've done a bunch of big series on how batteries are changing the electric grid, on the business of crime and the changing economics of Hollywood in 2026. With your help, we can do even more. Thank you. If you already go the extra mile as an NPR supporter. If not, you can join the PLUS community, get a bunch of perks like bonus episodes from across NPR's podcasts, and support public media by signing up for NPR today. Just go to plus.NPR.org.

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