Goldman CEO: AI Stock Market Correction Coming

Goldman Sachs CEO Warns of AI Investment Drawdown

Goldman Sachs CEO David Solomon cautioned Friday that the current enthusiasm for artificial intelligence investments might be excessive and anticipates a market correction. He made these comments during Italian Tech Week in Turin, Italy.

Solomon pointed out that the major U.S. stock indexes have reached new highs this year, fueled by the potential of AI. However, he suggested that many AI investments may not yield significant returns. Drawing a parallel to the dot-com bubble of the late 1990s and early 2000s, Solomon noted the surge in tech company investments followed by a stock market collapse. He anticipates a similar pattern, predicting a market drawdown within the next 12 to 24 months. He believes considerable capital invested in AI will fail to generate returns, leading to investor disappointment.

AI Investment Concerns

Earlier in the year, a collaboration involving tech giants like SoftBank, OpenAI, and Oracle, supported by President Trump, revealed plans to invest $500 billion over four years to develop new AI infrastructure across the nation.

Despite concerns about Trump's tariffs impacting stocks earlier in the year, optimism surrounding AI has propelled Wall Street indexes upward. This has prompted warnings from leaders in the financial and tech sectors about a potential bubble.

While refraining from using the term 'bubble,' Solomon acknowledged that investors are taking on more risk due to excitement, focusing on potential gains while overlooking potential downsides.

Investors have been heavily investing in companies like Microsoft, Alphabet, Palantir, and Nvidia, driven by announcements of multi-billion dollar AI investments by tech firms. The construction of energy infrastructure to power this technology is driving expensive data center deals.

“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.

Solomon emphasized the cyclical nature of markets, noting that significant technological advancements often lead to rapid capital formation and the emergence of new companies, causing the market to outpace potential. He emphasized that not every company will succeed. Amazon founder Jeff Bezos echoed these concerns at the same event, describing AI as being in an 'industrial bubble.'
However, Solomon also expressed enthusiasm about the future of artificial intelligence. He stated that he is excited about the expansion of technology, the creation of new companies, and the potential of AI in the enterprise, while also adding that he is not losing sleep over it.

“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.”