I think the stock wipeout would itself trigger a recession.

If the hyperscalers needed to wipe out most of their income on interest expense they’d lose a large amount of their market capitalization. This could drop the stock market a huge amount, and a lot of spending is driven by the “wealth effect” of households feeling wealthy.

Right, a stock market crash would be very likely given how concentrated it is on the Mag-7 (or whatever Big Tech is called now.) The reduced consumer spending due to the reduced "wealth effect" makes sense, and it could worsen the downward spiral.

But it seems to me that if a stock market wipeout triggers a recession, it's because of deeper, pre-existing problems with the broader economy (inflation, jobs, war) and the stock market (concentration, unrealistic valuations) that are unrelated to the AI spending.