Currently, the AI theme continues to heat up, with AI concept stocks such as NVIDIA and Microsoft driving the market to new highs. As the dominant theme in the US stock market, how long can the popularity of AI last has become the most concerning issue for investors.
Goldman Sachs strategist Ryan Hammond's team pointed out in a recent report that to know when the popularity of AI will fade, it is necessary to pay attention to a key signal - investment return.
Goldman Sachs stated that Amazon, Meta, Microsoft, and Alphabet have invested a total of $357 billion in capital expenditures and research and development over the past year. A significant portion of this huge expenditure is allocated to artificial intelligence, accounting for nearly a quarter of the total S&P 500 index capital and R&D expenditures.
According to data compiled by the media, Amazon's capital expenditure for this year is expected to be $63 billion, higher than the $53 billion in 2023. In 2024, Meta and Google's parent company Alphabet are expected to set record expenditures.
Goldman Sachs stated that if AI companies want to maintain high valuations, they will ultimately need to produce some results to prove themselves.
The bank expects that if AI spending fails to generate returns, the stock prices of these market leaders (AI companies) are expected to decline in the future.
Today's ultra large enterprises will eventually be required to prove that their investments can generate income and profits, "Hammond wrote in the report. If preliminary signs indicate that the investment cannot generate income and profits, it may lead to a valuation downgrade
Goldman Sachs pointed out that according to a metric it tracks, only 5% of companies currently use AI to produce goods and services.
Market participants show concerns
Goldman Sachs also pointed out that market participants have expressed concerns about the huge investments made by technology companies in AI.
Investors are uncertain about the investment returns of large tech stocks, but these stocks are still very popular, "the analyst wrote.
Even investors who are optimistic about the potential returns of AI applications in the long term seem to have considerable uncertainty about the timeline for (investment returns)
However, Goldman Sachs also admitted that compared with the level of capital expenditure during the burst of the Internet foam, the current AI expenditure "is still dwarfed".
Hammond said that at the peak of the last technology foam, technology, media and telecommunications (TMT) stocks used more than 100% of their operating cash flow for capital expenditure and research and development. Nowadays, this proportion is only 72%.