JPMorgan CEO: U.S. credit environment shows signs of 2008, AI-related software industry faces risk of default wave

JPMorgan Chase CEO Jamie Dimon said Monday that the current high asset prices and intense competition in the banking industry make him highly anxious, warning market participants that the current environment bears similarities to the period leading up to the 2008 financial crisis. He reminded that economic cycles inevitably reverse, and a wave of borrower defaults could impact unexpected industries.

At the annual investor update meeting held that day, Dimon noted that, despite economists claiming that tax cuts and deregulation under the Trump administration would boost this year’s economic growth, he personally prefers to think about potential pitfalls when market expectations are high. He stated:

“People are becoming complacent, believing that these high asset prices and high trading volumes are sustainable, and that we won’t face any problems. This increases overall economic risk.”

Dimon emphasized that the deterioration of the credit cycle is inevitable and often brings unexpected shocks.

“Eventually, the cycle will turn… I don’t know what combination of events will trigger this cycle. I feel highly anxious about it,” he said. “I’m not comforted by high asset prices. In fact, I think it increases the risk.”

Additionally, Dimon mentioned the potential threat of artificial intelligence development to credit quality in certain industries. In recent weeks, as investors evaluate the disruptive impact of AI models like Anthropic and OpenAI on many sectors—especially software companies—markets have experienced significant volatility. Dimon warned that, in every credit cycle, the most heavily impacted industries are often unexpected, and this time it could be the software industry hit by AI.

Credit Cycle Concerns and “Blind Chase for Yield”

Despite recent concerns about AI triggering credit issues in the software sector and causing private credit firms like Blue Owl to face investor withdrawals, the S&P 500 remains near record highs. However, this apparent prosperity has not alleviated executives’ worries about potential risks.

In response to senior banking analyst Mike Mayo’s question, Dimon said the current environment resembles the period three years before the 2008 financial crisis,

“Back then, everyone was making a lot of money, everyone was leveraging up, as if the sky was the limit.”

He criticized some financial institutions for reckless actions aimed at increasing net interest income (NII). “I see some people doing stupid things just to generate NII,” Dimon said. “While it feels good when everyone is ‘making money,’ when I consider all the factors at play, I can only take a deep breath and say, ‘Be careful of the minefield.’”

Troy Rohrbaugh, Co-Head of JPMorgan’s Commercial Banking and Investment Bank, echoed concerns about credit risk. He pointed out that the issues might not be limited to private credit but could have “more widespread” implications. “Right now, it seems confined to a few cases, but that can change quickly, and we are prepared,” Rohrbaugh said.

Winners and Losers in the AI Era

Regarding the recent “panic trading” across multiple industries driven by AI, Dimon acknowledged that this might lead JPMorgan to scrutinize certain loans more carefully. However, he expressed skepticism that AI concerns would significantly impact overall credit losses.

The financial sector has also been affected by the recent stock market declines triggered by AI worries, but Dimon remains confident in JPMorgan’s competitive position in AI. “Ultimately, in 100 sectors, we will be winners in 75 and losers in 25,” he said, clearly positioning JPMorgan as a potential winner in this technological transformation.

Succession Planning Remains Uncertain

During a two-hour extensive Q&A, questions about JPMorgan’s CEO succession were inevitably raised again. Dimon has led JPMorgan for 20 years, transforming it into the world’s largest and most profitable bank by market value.

Addressing this long-standing Wall Street focus, Dimon’s response was consistent with recent statements but he refused to specify a retirement timeline. “Someone told me I have to say very clearly,” Dimon said amid some analyst chuckles, “I will continue as CEO for a few more years, then possibly serve a few more as executive chairman.” He added that the final decision rests with JPMorgan’s board of directors.

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