Goldman warns AI optimism is hiding a massive risk

Fears that artificial intelligence could disrupt long-term corporate earnings are forcing US equity investors to reassess how much of stock valuations depend on future profit growth.

The bank said a significant portion of the S&P 500’s value is now tied to earnings expected more than a decade into the future — often referred to as “terminal value.” That share is currently around 75%, close to a 25-year high, suggesting elevated reliance on long-term growth assumptions, News.Az reports, citing Goldman Sachs.

Goldman analysts compared the current environment to past periods of optimistic expectations, including the dotcom era, when long-term growth projections heavily influenced market valuations.

Concerns have intensified as new AI tools continue to emerge, raising questions about their potential to automate tasks in areas such as software, marketing, and data analysis. This has already weighed on certain sectors, with software and services stocks in the S&P 500 down significantly year-to-date.

The report also highlights how sensitive valuations are to changes in long-term growth assumptions. Even a small downward revision could meaningfully reduce company valuations, with high-growth stocks particularly exposed compared to more stable businesses.

Goldman noted that AI-related uncertainty is likely to remain a persistent factor in markets as the technology continues to develop and reshape industries. The firm added that most companies still avoid discussing financial projections beyond a five-year horizon, despite the growing importance of long-term expectations in valuation models.

As AI adoption expands, investors are increasingly focused on which companies will benefit from productivity gains — and which could face disruption to their existing business models.

News.Az 

By Aysel Mammadzada