Goldman Sachs Warns of AI-Driven Earnings Bubble

Chief global equity strategist Peter Oppenheimer warned of a potential earnings bubble in technology stocks, citing a global increase in the cost of capital. In a report titled Competition for Capital, Oppenheimer argues that AI infrastructure spending and government borrowing are competing for the same limited pool of capital.

Data provided by Goldman Sachs shows that capital spending among AA-rated technology issuers grew 65 percent year-over-year in the second quarter. Additionally, AI-related borrowers represent 44 percent of the 135 billion dollars in U.S. convertible bond issuance year-to-date. While Oppenheimer notes that current technology profits are robust and balance sheets are stronger than they were during the 2008 financial crisis, he cautions that any slowdown in profit growth could pressure equity prices across the AI ecosystem.

Torsten Slok, chief economist at Apollo Global Management, supported this view by describing a transition from a savings glut to a savings shortage. Slok argues that because projects are now more abundant than available capital, capital is competing for projects by demanding higher returns, which in turn drives up yields.