Goldman Sachs Says About Strong Fundamentals of Early Winners in AI

Goldman Sachs Group strategists said that the first winners in the area of artificial intelligence have strong fundamental positions and are characterized by less extreme valuations compared to stocks in previous periods of abundance.

Goldman Sachs Says About Strong Fundamentals of Early Winners in AI

According to experts, the mentioned factors are evidence that the machine intelligence industry does not form a bubble, which is characteristic of spheres of activity that are in a state of active development, but have exaggerated estimates during their peak, which entails something like an oversupply crisis.

Goldman strategists, led by Peter Oppenheimer, stated in their note that, in their opinion, the current historical period is the initial stage of a new technological cycle, the development of which will gradually lead to productivity growth. Mr. Oppenheimer also says that the stocks leading the AI rally are at lower levels compared to the performance of the largest firms at the time of the previously observed technology bubbles. Separately, he noted that companies operating in the area of artificial intelligence are already demonstrating steady profitability and generating cash.

The appearance of a chatbot based on ChatGPT machine intelligence, developed by OpenAI specialists, provoked an explosive growth in demand for advanced technology, which has the potential for a profound transformation of many spheres of activity, including banking, the film industry, and education.

Citigroup strategists are convinced that the large-scale impact of artificial intelligence on business will manifest itself in two years. They also described this technology as a new growth factor in the stock market.

The excitement around AI spurred a rush, during which the first winners appeared, for whom the beginning of a new technological era was a period of unequivocal success. The value of the chip manufacturer’s shares Nvidia, whose products are necessary for artificial intelligence systems, has demonstrated growth of 232% since the beginning of this year.

Goldman analysts predict that the average earnings of shares of companies that have potential in the area of machine intelligence in their index may grow by 72% compared to the baseline.

The Nasdaq 100 index has grown 42% since the beginning of this year, compared with an 18% increase in the broader S&P 500 index. According to strategists Goldman, the excellent performance of technology stocks against the backdrop of higher bond yields is evidence that investors are convinced that higher growth rates in the future will be able to compensate for higher discount rates.

The optimistic attitude of the mentioned experts in terms of vision of the future exceeds those prospects, the potential of which is allowed by their colleagues from investment banks. For example, strategists at Bank of America said that the high level of consumer demand for AI will not be a salvation for the shares of technology companies that are under the influence of such a negative factor as a long-term increase in interest rates. Morgan Stanley experts say that there is a bubble in the area of machine intelligence, and it is approaching its peak.

Goldman strategists state that in the case of predicting the future of AI from the point of view of financial indicators, the problem is to assess the scale of benefits from advanced technology and determine winners and losers. They noted that the ratings of the dominant companies are high, but not excessive. According to strategists, this circumstance indicates the first phase of a typical technological wave.

Peter Oppenheimer predicted last year’s stock decline. At the same time, his forecast that in 2023 the growth in the value of securities will be limited by high rates and valuations has not yet been justified.

As we have reported earlier, Futurist Says About Exaggerated Fears of Humanlike AI.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.