JPMorgan Chase CEO: The U.S. credit environment shows signs reminiscent of 2008, and the AI-related software industry faces the risk of a wave of defaults

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

At the annual investor update meeting held that day, Dimon pointed out, although economists claim that the tax cuts and deregulation policies of the Trump administration will drive economic growth this year, he personally prefers to think about what could go wrong when market expectations are high. He stated:

“People are starting to get complacent, thinking that these high asset prices and high trading volumes are real, believing that we won’t encounter any problems. This increases overall economic risk.”

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

“There will come a day when the cycle reverses... I don’t know what event will trigger this cycle. I feel highly anxious about it,” he said. “I am not comforted by high asset prices. In fact, I think it increases risk.”

Additionally, Dimon mentioned the potential threat of artificial intelligence development to the credit quality of certain industries. In recent weeks, as investors assess the disruptive impact of AI models like Anthropic and OpenAI on numerous industries, particularly software companies, the market has experienced significant volatility. Dimon warned that the industries most affected in each credit cycle are often unexpected, “this time it could be the software industry impacted by AI.”

Concerns About the Credit Cycle and "Blind Pursuit of Profit"

Despite recent concerns about AI leading to scrutiny of credit in the software industry and causing investor withdrawal pressures on private credit institutions like Blue Owl, the S&P 500 index remains close to historical highs. However, this superficial prosperity has not alleviated executives' concerns about potential risks.

In response to a question from veteran banking analyst Mike Mayo, Dimon stated that the current environment is reminiscent of the three years leading up to the 2008 financial crisis,

“At that time, everyone was making a lot of money, people were leveraging up, as if the sky was the limit.”

He criticized some financial institutions for taking irrational actions in pursuit of net interest income (NII). “I see some people doing some stupid things just to create net interest income,” Dimon said, “Even though 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, ‘Watch out for the landmines.’”

JPMorgan Chase's co-head of commercial and investment banking, Troy Rohrbaugh, echoed concerns about credit risk at the meeting. He pointed out that the issues may not be limited to the private credit sector but could present “broader” characteristics. “Currently, it seems to be limited to a few cases, but this can easily change, and we are prepared for it,” Rohrbaugh said

Winners and Losers in the AI Era

Regarding the recent "panic trading" in multiple industries triggered by AI, Dimon acknowledged that this may prompt JPMorgan Chase to conduct stricter reviews on certain loans, but he expressed skepticism about whether AI concerns would have a significant impact on overall credit losses.

The financial industry has also been affected by the recent stock market decline caused by AI concerns, but Dimon is confident about JPMorgan Chase's competitive prospects in the AI field. "Ultimately, in 100 areas, we will be winners in 75 areas and losers in 25 areas," he stated, clearly positioning JPMorgan Chase as a potential winner in this technological transformation.

Succession Plan in Limbo

During a two-hour extensive Q&A session, the question of JPMorgan Chase's CEO successor was inevitably raised again. Over his 20 years at the helm of JPMorgan Chase, Dimon has transformed it into the largest and most profitable bank in the world by market value.

In response to this long-standing focus on Wall Street, Dimon's answer this time was consistent with his recent statements, but he refused to provide a specific retirement timeline. "Someone told me I must say this very clearly," Dimon said amid scattered laughter from analysts, "I will continue to serve as CEO for a few more years, and then possibly serve as Executive Chairman for a few more years." He added that the final decision rests with the JPMorgan Chase board of directors