Even Rich People Are Starting to Get Nervous About Trump’s Economy

If U.S. stock prices continue to fall, wealthy consumers could slow their spending, putting further pressure on the U.S. economy and markets.

That could mean everything from fewer luxury cars and handbags being sold to reduced demand for top-end homes and fancy vacations.

Broadly, retail sales rose a less-than-expected 0.2% in February from January, the Census Bureau reported earlier this week. There are signs affluent consumers are holding back, too. Major airlines cut their guidance for the first quarter last week on expectations of weak demand. And U.S. credit-card spending on top luxury brands declined 5% year over year in February, Citi reported on March 11.

Though it’s “too early to tell” whether spending will contract, every dollar decline in the value of assets, such as stocks or real estate, leads to a two cent decline in spending among “upper-end consumers,” according to Joseph Brusuelas, chief economist at RSM U.S.

Brusuelas’ calculation describes the so-called negative wealth effect, when a decline in investment portfolio value affects consumer attitudes toward how much they can spend.

Today, the S&P 500 is struggling, down just over 1% on Tuesday , leading to a 4.5% decline year to date, after slipping into correction territory last Thursday.

Even that 10% decline doesn’t mean a pullback in spending by the affluent is imminent, Brusuelas told Barron’s .

But the “volatility, uncertainty, complexity, and ambiguity,” in geopolitical, economic, and market news coming out of the U.S. doesn’t bode well for luxury spending in particular, according to Erwan Rambourg, global head of consumer and retail research at HSBC.

“Luxury demand is holding up in the U.S., but I’m not sure for how long,” Rambourg told Barron’s . “There might be a lag between the data points, the markets, and the actual spending.”

In addition to sharp declines in stocks and cryptocurrency since mid-February, affluent Americans are facing a decline of 5.39% in the value of the U.S. dollar against the euro this year. By contrast, the euro lost 6.2% against the dollar last year.

The dollar’s decline not only affects the price of luxury goods—many of which are made in Europe—but the desire of U.S. consumers to travel and spend across the Atlantic, according to HSBC.

Another challenge is the uncertain trajectory of tariffs on goods from Canada, Mexico, and Europe.

“I’ve always thought that you bought luxury not because you were wealthy, but because you were confident about the future,” Rambourg said. “The whole tariff conversation—the reversals on Canada and Mexico—one day it’s 25%, the following day it’s postponed by a month, the following day, you have some exceptions…if you’re a business manager and if you’re a consumer, obviously that will affect your confidence in a big way.”

Still, wealthier consumers have a significant buffer in their investment portfolios, which have grown substantially over several years of upward equity returns, according to Katie Nixon, CIO of Northern Trust Wealth Management.

“In any given year, you expect to have 5% pullbacks almost routinely,” Nixon said. “It’s just that we haven’t had one in a while so this feels kind of extreme.”

Investors know that markets can fall significantly, as happened during the financial crisis in 2008 or during the early days of pandemic, according to Scott Zelniker, private wealth advisor at UBS Wealth Management. “More often than not, the market was up significantly 12 months later,” Zelniker told Barron’s .

One topic of conversation among Zelniker’s clients, however, is whether to buy the cars they are leasing when their agreements expire instead of re-leasing them as usual, considering the potential for tariffs to lead to higher-priced automobiles, he said. “They already have a contract with a price.” Why buy, or lease, a new car?

A sharp technology sell-off has exposed a new anxiety on global markets: whether the enormous borrowing behind the artificial-intelligence infrastructure boom can generate sufficient returns as interest rates rise and Chinese competition intensifies.

The artificial-intelligence investment boom has powered technology shares, semiconductor manufacturers and data-centre operators to extraordinary heights. Last week, investors were given a reminder that much of this expansion is being built with borrowed money.

The technology-heavy Nasdaq Composite fell 4.5 per cent over the week ended October 16, its weakest performance since late June. Semiconductor shares suffered an even deeper correction, with the Philadelphia Semiconductor Index losing about 11.4 per cent.

The selling spread quickly through global markets. Micron Technology fell 14.6 per cent over the week, while South Korea’s Samsung Electronics and SK Hynix dropped approximately 18 per cent and 24 per cent respectively.

This was more than a routine bout of profit-taking. Investors were reassessing three interconnected risks: higher interest rates, the rapidly expanding debt burden attached to AI infrastructure and the prospect of stronger competition from Chinese memory-chip manufacturers.

The debt behind the AI build-out

Artificial intelligence requires a physical infrastructure network of enormous scale. Data centres must be built, advanced processors purchased, power supplies secured and cooling systems installed before customers begin generating meaningful revenue from them.

Technology companies are increasingly supplementing their own cash with corporate bonds, syndicated loans, equipment leases, private credit and project-level financing.

JPMorgan describes the emerging funding model as a combination of conventional corporate borrowing and project finance tied to individual data-centre assets. In Australia, the Reserve Bank estimates that syndicated loans accounted for approximately three-quarters of data-centre financing during 2025 and 2026 to date.

The numbers are becoming large enough to affect broader credit markets. The Federal Reserve Bank of Dallas has cited Wall Street estimates suggesting AI-related investment-grade bond issuance could approach US$300 billion in 2026 alone.

That borrowing is not automatically problematic. Debt can be an efficient way to finance long-lived infrastructure when future revenue is sufficiently predictable. The concern is that AI technology, customer demand and computing economics are changing much faster than the repayment schedules attached to the assets.

A data centre financed today may carry debt for years. Investors must therefore make assumptions about future utilisation rates, electricity prices, chip performance, customer concentration and the amount businesses will ultimately pay for AI computing.

When interest rates rise, those assumptions become less forgiving.

Inflation changes the calculation

September’s US inflation data intensified the pressure. Consumer prices increased 3.7 per cent over the year, ahead of market expectations and up from 3.4 per cent in August.

The hotter reading reduced confidence that interest rates would fall quickly and pushed bond yields higher. That matters particularly for companies whose valuations depend on profits expected well into the future, as well as highly leveraged infrastructure operators that may need to refinance.

CoreWeave has emerged as a closely watched test case. The specialist cloud-computing company has accumulated substantial debt and lease obligations to build AI capacity, while relying on a concentrated group of large technology customers.

Its shares fell sharply during the sell-off, while the cost of insuring its debt against default climbed. CoreWeave has argued that its contracted backlog more than covers its obligations and that financial markets do not always understand its business model. Nevertheless, its securities have become a proxy for investor confidence in debt-funded AI infrastructure.

Oracle, another major investor in AI computing capacity, fell 8.8 per cent in Friday trading, while CoreWeave dropped 15.5 per cent.

The question is shifting from how much AI infrastructure can be built to how profitably it can be operated.

China adds another source of pressure

Interest rates were not the only catalyst. Reports of advances by Chinese memory-chip producer ChangXin Memory Technologies raised concerns that lower-cost Chinese products could increase competition across the global semiconductor industry.

Memory chips are essential to AI systems, but the industry is historically cyclical. Periods of tight supply and high pricing can encourage rapid investment, eventually producing oversupply and falling margins.

The prospect of a well-funded Chinese competitor expanding its technological capabilities unsettled investors in Samsung, SK Hynix and Micron. It also demonstrated that AI-related demand does not insulate chipmakers from conventional competitive pressures.

That combination—slower rate cuts, more expensive financing and potentially cheaper supply—challenged the assumption that every company exposed to AI would enjoy continually expanding margins.

A reset rather than the end of the boom

The sell-off does not establish that the AI boom is ending. Demand for computing power remains strong, the largest technology companies continue to generate formidable cash flows and many infrastructure projects are backed by long-term customer contracts.

What has changed is the market’s willingness to overlook the price and financing structure of that growth.

The most resilient companies are likely to be those able to fund investment from operating cash flow, secure long-duration customers and demonstrate that new capacity will earn returns comfortably above its financing costs.

More speculative operators may face greater scrutiny, particularly where debt is expensive, customers are concentrated or expected revenue depends on demand that has not yet materialised.

For Australian investors, the lesson extends beyond US technology shares. Local data-centre operators, infrastructure funds, electricity suppliers and property groups are increasingly exposed to the same investment cycle.

Artificial intelligence may remain one of the defining growth themes of the decade. But last week’s correction showed that enthusiasm for the technology does not eliminate financial discipline.

The next stage of the AI boom will be judged not only by computing power, model performance or demand for chips, but by something more traditional: whether the assets being financed can generate enough cash to repay the money borrowed to build them.

Fact box

Nasdaq Composite: Down 4.5 per cent for the week ended October 16, 2026

Philadelphia Semiconductor Index: Down approximately 11.4 per cent

Micron Technology: Down approximately 14.6 per cent

Samsung Electronics: Down approximately 18 per cent

SK Hynix: Down approximately 24 per cent

US September inflation: 3.7 per cent annually

Estimated 2026 AI-related investment-grade issuance: Approximately US$300 billion