DoubleLine Capital founder Jeffrey Gundlach and Swiss hedge fund manager Felix Zulauf warned in a June 22 discussion published by DoubleLine Capital that the market decline could reach 30% to 50%, while the top 10 AI-related stock weights in the S&P 500 have already reached 41%.
The top 10 AI stock weights in the S&P 500 have reached 41%
In the interview, Gundlach said the index weight of the top 10 AI-related stocks in the S&P 500 has reached 41%, forming an extremely concentrated holdings structure. He said, “I suggest investors should not continue to hold any U.S. stocks that rely on momentum-driven or market-cap-weighted logic.”
Zulauf provided current data on AI capital expenditures during the interview: the proportion of capital expenditures of global large cloud computing companies (Hyperscaler) to revenue has surged from about 10% to 30%, storage chip prices have risen by 200% to 300%, and Oracle’s free cash flow has turned negative. He cited the Oracle case to argue that, “When these companies have to support AI investment by issuing stock or financing with debt, the AI cycle starts to cool down.”
Gundlach recalled during the interview that on September 30, 1999, he had publicly turned bearish on the Nasdaq, but then the Nasdaq rose 80% again in the last quarter; eighteen months later, the Nasdaq fell from 100 to about 20.
U.S. annual interest expense has risen from $300 billion to nearly $1.4 trillion
The fiscal condition data cited by Gundlach in the interview are as follows: U.S. annual interest expense has jumped from about $300 billion seven years ago to nearly $1.4 trillion; the fiscal deficit is expanding at a pace of about $2 trillion per year, accounting for around 6% of GDP.
Gundlach disclosed in the interview that the fund he manages began reducing its allocation to long-term U.S. Treasuries two years ago and mentioned that Japanese long-term government bond yields have been rising. In response to White House National Economic Council director Kevin Hassett’s public statement that “debt restructuring absolutely will not happen,” Gundlach said, “In the investment world, ‘it will never happen’ is often synonymous with ‘it’s about to happen.’”
On the dollar question, Zulauf noted in the interview that during the major adjustment in U.S. stocks in 2025, the U.S. dollar index fell in parallel by 8% to 10%, deviating from the historical pattern that in 12 of the previous 13 major U.S. stock adjustments the dollar had risen.
Gundlach: In the private credit market, the book valuation difference for the same loan can range from $95 to $8
Gundlach explained the valuation distortion phenomenon in the private credit market: for completely identical loan assets, the valuation differences across the books of different private funds can range from $95 to $8; some assets that have already been written down by 98% are still valued at par value 100. He said, “The current market environment reminds me of the eve of the 2005 to 2006 financial crisis—back then everyone was lying, and now it’s the same.”
Gundlach also pointed out that a large amount of risk is being hidden through a complex closed-loop structure formed via offshore reinsurance entities involving private equity, private credit, and insurance companies. Zulauf added in the interview that over the past year, Asian sovereign wealth funds have been buying AI technology stocks rather than U.S. Treasuries; “once the market reverses, they won’t just sell stocks—they’ll also sell dollars.”
FAQ
Under what background was the interview between Gundlach and Zulauf published?
The interview was hosted by DoubleLine Capital and published on June 22, 2026 on its official blog. Gundlach is the founder of DoubleLine Capital, which manages a huge asset base and is known in the industry as the “New Bond King”; Zulauf is a well-known Swiss macro hedge fund manager who has long tracked global liquidity cycles.
What specific actions has Gundlach disclosed that he has taken?
Gundlach disclosed in the interview that the fund he manages began reducing the allocation proportion to long-term U.S. Treasuries two years ago to hedge potential fiscal risks. He also clearly stated in the interview that he advises investors not to hold U.S. stocks that rely on momentum-driven or market-cap-weighted logic.
What is the most direct observational indicator that Zulauf mentioned for judging whether the AI hype has topped out?
Zulauf said in the interview that the most direct observational indicator is the stock price trend of semiconductor companies that “sell shovels to gold miners,” rather than AI applications themselves. He specifically pointed out that Hyperscaler capital expenditures as a share of revenue has risen from 10% to 30%, and Oracle’s free cash flow has turned negative, which he views as a quantitative signal of the current AI cycle.
