Forget Tariffs: 2 Other Reasons a Stock Market Crash Could Occur Under President Trump
President Donald Trump has introduced a remarkable level of uncertainty into the global economy and financial markets. The clearest example of this involves his "Liberation Day" tariffs, through which he imposed import taxes of 10% to 50% or more on goods from nearly all of America's trading partners for close to a year.
Those tariffs were ruled illegal by the Supreme Court last month. But over the next few months, Trump is expected to continue trying to pursue his tariff policy through other means -- a situation that makes it difficult for companies to plan for the future.
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However, as worrisome as the tariff tug of war might be, it isn't even the scariest risk factor facing the market in 2026. Here are two other reasons the market could soon experience a significant correction under Trump.
1. AI data center spending looks unsustainable
Despite the macroeconomic uncertainty, 2025 was a surprisingly good year for stocks and, arguably, the U.S. economy as a whole. Gross domestic product (GDP) grew by a solid 2.2% while the S&P 500 rose by roughly 18%, which is significantly above its historical annualized average of around 10%.
That said, that growth wasn't necessarily the result of broad-based gains shared by a majority of companies. TheNew York Times reports that the heavily AI-exposed Magnificent Seven stocks accounted for half of the index's rise over the past three years -- with chipmaker Nvidia alone responsible for a whopping 15% of the S&P 500's total return in 2025. This trend means the stock market is overexposed to the performance of one industry, and that industry's long-term success is far from guaranteed.
Despite the hype, generative AI remains speculative and unproven. This is demonstrated by the eye-watering losses of industry leaders like OpenAI, which is expected to burn through $14 billion this year. While pick-and-shovel providers continue to make record profits by selling chips and data center equipment, consumer-facing AI companies are struggling to turn large language models (LLMs) into viable, profitable business models.
The cyclically adjusted price-to-earnings (CAPE) ratio is a market valuation metric that compares the average price of stocks to inflation-adjusted earnings over the past 10 years to smooth out economic cycles. Right now, the CAPE ratio sits at 40 -- a high it has not seen since the peak of the dot-com bubble in 2000. Meanwhile, massive data center spending could start to drag down corporate earnings as depreciation expenses pile up on the books.
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