David Solomon, CEO of Goldman Sachs.
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According to David Solomon, CEO of Goldman Sachs, the stock market is caused by a “draw down” next year or two after years of pushing for highs by AI Frenzy.
“The market is running in cycles and whenever there has been a major acceleration in new technology that generates a lot of capital formation, there are many interesting new companies around it, but in general you can see that the market is ahead of the possibilities… there will be winners and losers.”
Solomon pointed to the massive adoption of the Internet in the late 1990s and early 2000s, leading to the emergence of the world’s largest companies, but investors lost money to what became known as the “dot-com bubble.”
“We’ll see a similar phenomenon here,” he said. “It’s no surprise that we’ll see a drawdown in regards to the stock market in the next 12-24 months, and I think there’s a lot of capital being deployed.
In recent years, the AI boom has attracted the global market, with numerous new technologies, billions of dollars in trading, and the continued rise of ChatGpt-Developer Openai. Watching investors bet big on technology and pour capital into stocks Microsoft, alphabet, Palantir and nvidia.
Talking about AI helped to raise the Wall Street index high, even if President Donald Trump’s trade policy dented the US average earlier this year. However, as investors continue to seek opportunities with AI, concerns have been raised about the possibility that the bubble could explode somewhere.
“I’m not going to use the word bubble. I don’t know what the path will be, but I know people are on the risk curve because I’m excited,” Solomon said Friday.
“And when (the investors) are excited, they tend to think about good things that can go right, reducing the chances that you might be wrong about what you should be skeptical… There’s a reset, there’s a check at some point, there’s a drawdown.
Solomon is not only concerned about current market levels. Speaking at the same event, Amazon founder Jeff Bezos said Friday that artificial intelligence is currently in the “industrial bubble.”
And earlier this week, veteran investor Leon Cooperman told CNBC that we are in the second half of a bull market where bubbles could form. Warren Buffett warned.
Meanwhile, Karim Moussalem, Chief Investment Officer of Selwood Asset Management, has warned of “huge risks” on the horizon of AI trade that could quickly unravel. “AI trade is beginning to resemble one of the great speculative enthusiasts in market history,” Moussalem, a London-based hedge fund running a market-neutral equity strategy, said in a LinkedIn post.
However, Solomon predicted that some money would be lost, but he also seemed optimistic about artificial intelligence.
“I sleep very well. I’m not going to sleep every night worrying about what happens next,” Solomon said Friday. “Generally speaking, I think what’s very exciting is that the technology is expanding and new companies are being formed, and the chances of this technology being deployed to companies can be very, very powerful, so it’s an exciting time.”
– CNBC’s HughLeask and Yun Li contributed to this report
