Goldman Sachs is optimistic about the current stage of a new technology cycle and dismisses the notion of an artificial intelligence (AI) bubble, despite concerns raised by analysts regarding the rapid growth of the AI market and tech stock prices. Instead, the financial giant believes that we are on the cusp of an AI revolution, contrary to the anticipated bubble.
Comparisons have been drawn between the recent surge in AI stock prices and the dot-com bubble of the late 1990s, but Goldman Sachs strongly opposes this analogy.
Peter Oppenheimer, Chief Global Equity Strategist at Goldman Sachs, emphasized in a recent publication:
“We firmly believe that we are still in the early phases of a new technology cycle, which is set to deliver further robust performance.”
Goldman Sachs predicts a significant increase in global investments in artificial intelligence, with the potential to reach $200 billion by 2025. This growth is closely tied to the substantial economic opportunities presented by generative AI, a subset of AI focused on generating content using large language models. Earlier reports suggest that generative AI could contribute up to $4.4 trillion to the global economy.
AI stocks have demonstrated impressive performance throughout the year, contributing to the recovery of the entire SP500 index following setbacks in 2022. According to the report, the valuations of leading market stocks are not as inflated as they were during past periods, such as the internet bubble that burst in 2000. Furthermore, these companies boast exceptionally strong balance sheets and returns on investment.
While the outlook for the AI sector looks favorable, some experts advise caution and recommend a thoughtful approach when considering investments in this sector. Oppenheimer introduced the PEARL framework, designed to assist individuals in making well-informed decisions following thorough research.