Goldman Sachs says US stocks may face net equity supply pressure in 2027 after a final year-end rally

AT A GLANCE

A Goldman Sachs representative said that the three supports for US stocks are weakening at the margin, and net equity supply is expected to reach its highest level since 2000 in 2027.

Article

Goldman Sachs warns the US stock bull market may see its final leg up, with net equity supply in 2027 set to hit the highest since 2000

BlockBeats news, November 9, Tony Pasquariello, Goldman Sachs' global head of hedge fund coverage, warned that the three major drivers supporting the US stock market's rise over the past 4 years—earnings growth, fund flows and the AI narrative—are all showing marginal deterioration. Although the S&P 500 is still expected to complete a final leg up by year-end, the market in 2027 may face the largest net equity supply shock since the bursting of the dot-com bubble in 2000, and index volatility may also trend higher.

Pasquariello pointed out that S&P 500 earnings growth reached 33% in the second quarter and an estimated 35% in the third quarter, but growth momentum may be peaking. Goldman Sachs expects S&P 500 earnings per share (EPS) to still grow about 18% in 2027, but changes in AI capital expenditure may bring significant downside risk.

The funding side is also under pressure. Goldman Sachs prime brokerage data show that over the past 20 trading days, hedge funds sold global AI stocks at the fastest pace in more than 5 years, deviating from the historical average by more than 3 standard deviations. Weaker corporate buybacks, shrinking purchases by overseas investors and CTA strategies following the sell-off further weaken the market's capacity to absorb supply.

Goldman Sachs expects that IPOs by large companies such as SpaceX and Anthropic, as well as tech giants using more cash flow for AI infrastructure construction rather than stock buybacks, will jointly push net equity supply in the US stock market in 2027 to the highest level since 2000.

The AI narrative is also beginning to diverge. The market expects the pace of capital expenditure growth by tech giants to slow from 96% this year to 44% next year, and net free cash flow consumption by hyperscale cloud providers reached 31000000000 USD in the third quarter. Goldman Sachs believes the market is shifting from previously mainly pricing the growth space brought by AI investment to also assessing the uncertainty of capital expenditure sustainability and investment returns.

On valuation, the Nasdaq 100's forward price-to-earnings ratio has fallen to 18.4 times, the lowest level since 2020. However, Pasquariello cited the views of two veteran investors saying that the current stock market still looks overly optimistic compared with the credit market, and that pressure on AI-related high-yield bonds may mean the credit market is the first to reflect financing risk.

Another Goldman Sachs strategist, Rich Privorotsky, believes this round of adjustment is closer to the liquidity event of 1998 rather than the dot-com bubble burst of 2000, but also acknowledged that the current scale of AI investment and uncertainty of returns have unsettling similarities with 2000.

Key points

BlockBeats said that Tony Pasquariello, global head of hedge fund business at Goldman Sachs, warned that all three drivers—earnings growth, fund flows and the AI narrative—have shown marginal deterioration.
Pasquariello said that the S&P 500 index's earnings growth in the second and third quarters reached 33% and an estimated 35%, respectively, but growth momentum may have peaked.
Goldman Sachs expects S&P 500 earnings per share to still grow by approximately 18% in 2027, but changes in AI capital expenditure may bring downside risks.
Goldman Sachs prime brokerage data show that over the past 20 trading days, hedge funds sold global AI stocks at the fastest pace in more than 5 years, deviating from the historical average by more than 3 standard deviations.
Goldman Sachs expects that an increase in large corporate IPOs and a reduction in share buybacks by tech giants will push net US equity supply in 2027 to its highest level since 2000.
The article states that the forward price-to-earnings ratio of the Nasdaq 100 index has fallen to 18.4 times, its lowest level since 2020.
Rich Privorotsky believes that this round of adjustment is closer to the liquidity event of 1998, rather than the bursting of the internet bubble in 2000.

AI-assisted interpretation

The following is analysis, separate from reported facts. Verify important claims independently.

This report relays the judgment of Goldman Sachs personnel: corporate earnings growth may slow, some funds are selling AI stocks, and an increase in IPOs coupled with a decrease in stock buybacks may lead to more tradable shares on the market. When supply increases while buying weakens, stock prices are more prone to volatility. However, the 2027 data and the "final rally" mentioned in the article are both predictions, not outcomes that have already occurred.

Why it matters to readers

If the supply and funding trends reported materialize, the US stock market's absorption capacity may weaken and index volatility may rise; whether AI capital expenditure can be sustained and generate returns is also an important observation point for market valuations.

Beginners should treat this content as an institutional risk judgment rather than a definitive signal of price movement. They can focus on distinguishing between data that has already been disclosed and forecasts for 2027, and pay attention to subsequent changes in earnings, buybacks, IPO, and AI investment returns.

Risks and unknowns

The report does not provide the original Goldman Sachs report or data links, and the relevant figures and statements cannot be verified against the original materials.
Net equity supply, EPS growth, and index volatility for 2027 are all forecasts, and actual results remain uncertain.
The specific impact of changes in AI capital expenditure on earnings, buybacks and market valuations has not yet been confirmed.

Goldman Sachs says US stocks may face net equity supply pressure in 2027 after a final year-end rally

Article

AI-assisted interpretation

Why it matters to readers

Risks and unknowns

Related Developments

Related concepts

Keep following

Security Center