Goldman Sachs Issues a Warning to AI Stock Investors

Goldman Sachs is sounding an early alarm on the near-term trajectory of AI stocks.

Hammond’s concerns come as AI stocks face renewed pressure.

“There is limited appetite for firms with AI-enabled revenues as investors grapple with whether AI is a threat or an opportunity for many. While we expect the AI trade will transition to Phase 3, investors will likely require evidence of a tangible impact on near-term earnings to embrace these stocks,” Goldman Sachs US equity strategist Ryan Hammond wrote in a new note on Friday, Brian Sozzi reported for Yahoo Finance.

Unlike Phase 2, Phase 3 will likely produce clear winners and losers, Hammond predicted.

He noted that AI investment as a share of capital expenditures could be nearing a peak — setting the stage for overly bullish investors to be disappointed if earnings fail to deliver in coming quarters.

“Investors increasingly ask us whether current US equity prices are reflective of overly optimistic investor expectations,” he added.

Hammond’s concerns come as AI stocks face renewed pressure. Nvidia shares have dropped 6% over the past five sessions after investors reassessed its outlook.

Salesforce and Figma also tumbled recently after lackluster earnings. On Wall Street, skepticism is growing over the pace of corporate AI adoption amid signs of a slowing US economy.

“In this market out there, where you have companies trading at 100 times revenue, you have companies trading at half-trillion-dollar valuations that lose $10 billion a year, I mean, a lot of these valuations are crazy,” C3.ai founder and executive chairman Stephen Ehikian said.