Goldman Sachs Warns AI Boom Tailwind Will Fade by 2027

Chief US equity strategist Ben Snider warns that the AI investment boom, which drove nearly half of S&P 500 earnings growth this year, will likely stop providing a market tailwind by 2027. While capital expenditure spending may continue to rise, Snider expects earnings growth to decelerate significantly over the next two years.

This projected slowdown stems from a predicted decline in semiconductor profit margin expansion and a reduction in other income from private investments. Snider notes that current semiconductor margins leave the S&P 500 vulnerable to chip price declines, which could occur if supply increases or technological shifts happen. He suggests that a removal of other income could create an 8 percentage point drag on earnings growth in 2027 relative to 2026.