"Goldman Sachs tackled the "most important question for the U.S. equity market outlook" on Monday: whether the market is "correctly valuing the benefits from AI." The answer is a qualified yes, a denial that company valuations are at "bubble levels," and a finding that the market is, shall we say, excessively optimistic. The U.S. equity market may have already incorporated a significant amount of the potential long-term value generated by AI, according to a new analysis from the investment bank. Some "simple arithmetic," analysts Dominic Wilson and Vickie Chang write, suggests market pricing for AI gains is running "well ahead of the macro impact," with the valuation surge in AI-related companies approaching the upper limits of plausible economy-wide benefits."
"The report estimates that the Present Discounted Value (PDV) of the capital revenue resulting from generative AI for the U.S. economy has a baseline estimate of $8 trillion. Although this calculation is inherently uncertain, the plausible range for these future capital revenues sits between $5 trillion and $19 trillion. Significantly, these projected benefits are sufficient to justify current and anticipated levels of investment spending on AI-related capital expenditure (capex), a major concern in the financial media of late."
The U.S. equity market may have already priced a significant portion of AI's long-term value. Market pricing for AI gains appears to be running well ahead of the expected macroeconomic impact, with valuation increases in AI-related companies approaching the upper bounds of plausible economy-wide benefits. Present discounted value of generative AI capital revenue for the U.S. has a baseline estimate of $8 trillion, with a plausible range of $5 trillion to $19 trillion. These projected benefits support current and planned AI-related capex, but market enthusiasm has surged beyond baseline macro calculations. Company valuations are high but not necessarily at bubble levels.
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