Business
Don’t fear the AI bubble, it’s about to unlock an $8 trillion opportunity, Goldman Sachs says
Stop worrying about the bubble in AI—it’s sustainable, three Wall Street analysts from Goldman Sachs, JPMorgan, and Wedbush argued this morning in notes seen by Fortune.
Traders seem to agree—at least for now. Futures contracts for the tech-heavy Nasdaq 100 were up 55% this morning prior to the opening bell, after the index closed up 0.68% yesterday. The index is up 18% this year, despite worries that the AI boom bears a resemblance to the dot-com bubble of 2000.
Hemant Taneja, CEO of VC firm General Catalyst, was quoted in the Financial Times this morning saying, “Of course there’s a bubble … Bubbles are good. Bubbles align capital and talent in a new trend, and that creates some carnage but it also creates enduring, new businesses that change the world.”
The FT’s report hinges on the fact that VC firms have ploughed $161 billion into AI startups this year, and 10 of them—OpenAI and Anthropic among them—now have a collective valuation of $1 trillion. But none of them are profitable, the FT says.
We should all stop worrying and learn to love the AI boom, if new research from Goldman Sachs is correct. In a note titled “The AI Spending Boom Is Not Too Big,” Joseph Briggs and his colleagues say “anticipated investment levels are sustainable, although the ultimate AI winners remain less clear.”
The Goldman team argues that when deployed properly, the productivity gains from AI will far exceed the investment currently going into it.
“We are not concerned about the total amount of AI investment. AI investment as a share of US GDP is smaller today (<1%) than in prior large technology cycles (2-5%). Furthermore, we estimate an $8tn present-discounted value for the capital revenue unlocked by AI productivity gains in the US, with plausible estimates ranging from $5tn-$19tn,” they said.
The money going into AI-related capital expenditures (capex) will grow massively this year and next, according to Samik Chatterjee and his colleagues at JPMorgan. Capex across the AI “hyperscalers” will grow 60% this year and another 30% next year, they say.
“On a dollar basis, the growth implies a significant increase of more than +$100 bn of additional datacenter capex in 2025, the largest annual step-up to date, surpassing the record set in 2024. Importantly, the stronger trajectory is also anticipated to carry into 2026, where growth is now tracking at … more than +$80 bn for next year.” Capex will be in the region of $300 billion this year from Google, Amazon, Microsoft and Meta alone, Goldman estimates:
The irrepressible Daniel Ives of Wedbush, perhaps Wall Street’s biggest cheerleader for AI, took a field trip to Asia to see for himself what the demand for Nividia’s chips is like. “We estimate the demand to supply ratio from enterprises for Nvidia’s next generation GPUs are approaching 10:1 which is a staggering number which speaks to how early this AI Revolution is in its life cycle,” he told clients in a research note. “We have barely scratched the surface of this 4th Industrial Revolution.”
Here’s a snapshot of the markets ahead of the opening bell in New York this morning:
- S&P 500 futures were up 0.36% this morning. The index closed up 0.4% in its last session.
- STOXX Europe 600 was up 0.42% in early trading.
- The U.K.’s FTSE 100 was flat in early trading.
- Japan’s Nikkei 225 was up 1.27%.
- China’s CSI 300 was up 0.26%.
- The South Korea KOSPI was up 2.49%.
- India’s Nifty 50 was up 1.03% before the end of the session.
- Bitcoin was down to $110.8K.
