Elliott Warns of Bear Market Risks, Citing AI Borrowing and Private Credit

Elliott Investment Management warned of a potentially severe bear market, citing US fiscal deficits, persistent inflation, private credit risk, and AI investment exuberance in its October investor letter, which the Wall Street Journal reviewed. The firm specifically flagged circular investment arrangements between AI model developers and infrastructure manufacturers, along with increasingly debt-funded AI capital expenditure. Elliott compared current market conditions to America's pre-Great Depression boom era, stating that "nearly every alarm bell warning of a significant bear market is ringing." The hedge fund drew parallels between today's leveraged risk-taking and speculative behavior around new technologies in past cycles. Investors should watch for further details on Elliott's positioning and whether other major funds echo its concerns about AI-linked credit exposure.