Carson Block, founder of Muddy Waters, has warned that artificial intelligence could trigger market upheaval surpassing the 2008-09 financial crisis. The prominent short seller told the Financial Times that rapid AI adoption will cause severe economic disruption over the coming years, affecting job markets, government finances, and financial stability.

Block's prediction marks a dramatic shift after years of struggle for US short sellers. The S&P 500 index's gains have faded as enthusiasm for AI splinters into a hunt for winners and losers from the technology. Prominent short sellers like Jim Chanos and Hindenburg Research's Nathan Anderson have wound down their firms in recent years, squeezed by a multiyear equity market rally fueled by passive investment funds and retail investors.

Block argues that AI disruption will hit the broader market through job losses, as smaller contributions into 401k retirement plans further undermine stock prices. He also points to weaknesses in private credit, warning that too much money has flowed into an asset class unable to make enough high-quality loans. Short interest in S&P 500 stocks was near its highest in a decade in February, according to Goldman Sachs data, with software becoming a popular hedge fund target as investors position for the AI-driven market transformation.