Goldman Sachs CEO David Solomon on Friday warned that an AI investment frenzy may be overdone – and that stock markets are due for a “drawdown”.
Major US stock indexes have notched record high after record high this year on the promise of artificial intelligence, but there’s a good chance that not all of those investments will deliver big returns, Solomon said during Italian Tech Week in Turin, Italy, on Friday.
He noted that the internet craze of the late 1990s and early 2000s drew a frenzy of investment in tech companies. But it was followed by a dramatic collapse in the shares of many of those firms – known as the “dot-com bubble”.
“You’re going to see a similar phenomenon here,” Solomon said. “I wouldn’t be surprised if in the next 12 to 24 months, we see a drawdown with respect to equity markets.”
“I think that there will be a lot of capital that’s deployed that will turn out to not deliver returns, and when that happens, people won’t feel good.”
President Trump earlier this year unveiled a collaboration between top tech firms like SoftBank, OpenAI and Oracle that intends to invest $500 billion over the next four years into building new AI infrastructure across the country.
AI optimism has helped push Wall Street indexes higher and higher, even after fears around Trump’s tariffs tanked stocks earlier this year.
That’s led some leaders in the financial and tech industries to warn of a potential “bubble burst” down the line.
“I’m not going to use the word bubble, because I don’t know, I don’t know what the path will be, but I do know people are out on the risk curve because they’re excited,” Solomon said.
“And when [investors are] excited, they tend to think about the good things that can go right, and they diminish the things you should be skeptical about that can go wrong.”
Investors have poured capital into stocks like Microsoft, Alphabet, Palantir and Nvidia, as tech firms announce multi-billion dollar investments in AI.
Pricey data center deals have taken center stage as companies try to build out the energy infrastructure needed to power this new tech.
“There will be a reset, there will be a check at some point, there will be a drawdown. The extent of that will depend on how long this [bull run] goes,” he added.
“Markets run in cycles, and whenever we’ve historically had a significant acceleration in a new technology that creates a lot of capital formation, and therefore lots of interesting new companies around it, you generally see the market run ahead of the potential,” Solomon aded.
“There are going to be winners and losers.”
Solomon isn’t the only one pointing to red flags when it comes to massive AI investments.
At the same event on Friday, Amazon founder Jeff Bezos said AI is currently in an “industrial bubble.”
However, Solomon also expressed excitement about the future of artificial intelligence.
“I sleep very well. I’m not going to bed every night worried about what will happen next,” Solomon said.
“Generally speaking, I think what’s super exciting is the technology is expanding, new companies are being formed, and the potential of this technology deployed into the enterprise can be very, very powerful. So, it’s an exciting time.”
Credit: Source link
