Carson Block, founder of Muddy Waters, said his outlook on the US economy and markets changed sharply after using the latest version of Claude, leading him to warn that AI-driven displacement of knowledge workers could spark a systemic shock larger than the 2008 global financial crisis. He said he has already positioned for that view by shorting LQD and HYG.
In interviews with Bloomberg, Block said that as recently as 6 weeks ago he was still fully bullish on the S&P 500 and the broader US economy. That changed after he spent time testing Claude. He said the model’s capabilities were beyond what he had expected and argued that the resulting crisis could “dwarf the global financial crisis,��� with serious medium- to long-term consequences for the economy, markets, and government finances.
Block sees knowledge workers as the first pressure point
His main concern is the labor market. Block said that 15% of knowledge worker jobs in the US could disappear within 3 years. He pointed to white-collar and high-income professions such as lawyers, analysts, engineers, and journalists rather than factory jobs. In his view, that kind of job loss would not stay confined to employment data. It would hit consumer spending, retirement contributions, and market pricing in sequence.
He also framed the shift as a rare opening for short sellers. The trigger, in his telling, was not a research note or macro forecast but direct exposure to an AI product. That detail has become part of the story, because it suggests his change in view came from hands-on use rather than a distant market thesis.
Why his trade targets credit instead of big tech stocks
Block is not betting against AI leaders such as Nvidia or Meta. He said that kind of trade would be a “widowmaker.” Instead, he is aiming at the credit market through iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) and iShares iBoxx $ High Yield Corporate Bond ETF (HYG).
His argument is that credit spreads are far too tight and credit volatility is too low, leaving the market underprepared for a broader shock. The chain he described starts with AI replacing white-collar jobs, then moves to weaker consumption and stalled or reversed 401(k) flows, which would drain a major source of long-term passive support for equities. From there, stress would first appear in high-yield debt and widening credit spreads before reaching stocks.
Crypto would not be insulated from a credit event
That thesis begins in employment and bond markets, but the spillover would reach crypto if it plays out. The source material points to a familiar pattern: when credit spreads widen quickly, risk assets usually come under pressure across the board. Bitcoin and Ether during the March 2020 liquidity shock remain an obvious reference point.
There is also the Federal Reserve angle. If AI-driven disruption pushes unemployment higher, rate-cut expectations could move forward. For Bitcoin, that creates tension rather than a simple bullish setup. Tighter liquidity in the near term can hurt valuations, while looser policy later can help restore momentum. Block’s warning is centered less on tech equity valuations and more on a credit market he believes is still not priced for this scenario.