Goldman Sachs CEO David Solomon, one of the top executives on Wall Street at one of its most storied investment banks, has a take on the AI investment bubble. It\u2019s just the same as any other time a lot of capital chased a boom in one sector of the economy. But he insists he\u2019s \u201cnot smart enough\u201d to know whether it\u2019s a bubble or not.<\/p>\n
What he\u2019s sure about is that \u201cit\u2019s not different this time.\u201d<\/p>\n
Speaking on Friday at a tech conference in Turin, Italy, Solomon said in remarks reported by the Financial Times<\/a> that this is the kind of thing you see in booms and in busts. \u201cThere will be a lot of capital that was deployed that didn\u2019t deliver returns,\u201d he said. That\u2019s no different from how investment works. \u201cWe just don\u2019t know how that will play out.\u201d<\/p>\n He added that he\u2019s bracing for markets to come down a bit from a remarkably long-running rally.<\/p>\n \u201cI wouldn\u2019t be surprised if in the next 12 to 24 months we see a drawdown in equity markets, but that shouldn\u2019t be surprising given the run we\u2019ve had,\u201d Solomon said.<\/p>\n The S&P 500 has been on a tear for the better part of the past five years, thanks in part to billions of dollars in AI investment and mega stock gains made by tech companies such as Nvidia<\/a>. The index, which tracks the broader market, has hit 190 record highs since 2020. At the same time, some investors have raised concern about the index\u2019s concentration, which is at a record high with the top 10 companies now making up about 40% of its total market cap<\/a>\u2014compared with 20% a decade ago. The S&P 500 was up 15% year to date as of Friday.<\/p>\n Some high-profile names have been clear they believe the current AI-fueled investment craze could be a \u201cbubble.\u201d At the same conference in Turin on Friday, Amazon<\/a> founder and executive chairman Jeff Bezos said<\/a> AI was \u201ckind of an industrial bubble as opposed to financial bubbles.\u201d This means the massive amounts of capital invested in AI will bring positive results for society even if share prices ultimately drop, he said. Bezos pointed to the large-scale investment in fiber-optic cable that came out of the dotcom bubble as an example of a benefit that outlasted some of the companies from that era.<\/p>\n Others, like OpenAI CEO Sam Altman, have seemingly acknowledged the possibility that AI could be in a bubble, but have tried to brush away concerns.<\/p>\n \u201cBetween the 10 years we\u2019ve already been operating and the many decades ahead of us, there will be booms and busts,\u201d Altman said<\/a> while touring a giant new data center in Texas, when asked about a potential AI bubble this week. \u201cPeople will overinvest and lose money, and underinvest and lose a lot of revenue.\u201d<\/p>\n In August, Altman sent ripples through the market when he uttered the actual word \u201cbubble,\u201d<\/a> and a day later all the Magnificent Seven companies saw selloffs<\/a>, bringing the tech-heavy Nasdaq<\/a> down about 1.5% and the S&P 500 down 0.6% in what became a multiday market wobble.<\/p>\n For his part, Solomon said Friday he was interested to see how AI will boost productivity and predicted the \u201cbusiness of work will be transformed by AI globally.\u201d<\/p>\n Goldman is one of the many companies integrating AI into its operations. Its software engineers saw a 20% boost from using AI coding assistant tools, the global head of engineering in the banking and markets division, Melissa Goldman, told Business Insider<\/a>. The firm also has an in-house version of ChatGPT as well as a \u201cbanker copilot\u201d tool that some workers in its investment banking division use to work with insider protected information like dealmaking data.<\/p>\n \u201cWe are at the beginning of the movie, not the end of the movie,\u201d Solomon claimed.<\/p>\n