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Goldman Sachs is divided internally over the AI market outlook: one side warns that earnings growth has peaked, while the other says 1100000000000 USD orders have validated investment returns
According to BlockBeats,November 1, two senior Goldman Sachs strategists offered sharply different assessments of the outlook for the AI market. Tony Pasquariello believes that third-quarter earnings reports from tech giants revealed that S&P 500 earnings growth may have already peaked, with upward market momentum weakening, making large bets inadvisable at present; London-based strategist Mark Wilson, meanwhile, believes that Google Cloud and AWS have combined order backlog of approximately 1100000000000 USD, which provides fairly clear evidence that AI investment returns are materializing, and maintains a bullish stance.
Data cited by Wilson include: Google Cloud revenue grew year on year by 103%, while order backlog increased 256%to 561000000000 USD；AWS revenue grew 39%, while order backlog increased 189%to 578000000000 USD, with their combined order backlog at approximately 1140000000000 USD. Wilson believes the growth performance of major global cloud service providers indicates that AI demand remains strong and that market doubts about investment returns are being addressed.
However, Pasquariello believes that strong cloud-business growth masks weakness in other core businesses. Tech giants continue to expand capital expenditures without correspondingly demonstrating room for earnings growth. He noted that S&P 500 earnings growth has shown signs of peaking, while the pace of upward revisions to forward earnings-per-share expectations has also slowed markedly.
The market's core debate has shifted from whether AI demand exists to how investment returns will materialize. Despite having 561000000000 USD in cloud-business order backlog, Alphabet recorded a 910000000 USD net free-cash-flow outflow this quarter, below the market expectation of a 3500000000 USD net inflow. Another Goldman Sachs strategist, Rich Privorotsky, frames the issue as “value capture”: which companies in the AI value chain can actually generate profits, and how high the financing costs will be.
Meanwhile, U.S. equities have shown clear internal divergence. Excluding AI stocks, the S&P 500 Index October has significantly outperformed technology stocks. Both strategists believe market volatility is unusual, but continue to differ on whether the AI market rally can continue.
Original link https://m.theblockbeats.info/flash/374874