Goldman Sachs says the next wave of artificial intelligence profits may come from enterprise software giants rather than early-stage startups.
In a new CNBC interview, Goldman senior software analyst Kash Rangan says AI adoption remains fragmented across corporations despite explosive consumer enthusiasm.
He believes the coming phase of AI growth will be defined by how effectively large software firms convert experimental projects into recurring revenue.
“But the thing that I’ve tried to focus on is the enterprise market. Where is the return on investment in the enterprise market? You’ve seen that happen in a narrow couple of silos. Coding, obviously, everybody knows about Cursor, how AI is great at software development, et cetera. Outside of that, maybe customer support. The revenue picture across the tail of enterprise software segments is still a little feeble.”
Rangan cautions that much of the current AI-related income remains short-term, describing it as activity without recurring value.
“Everybody’s seeing the activity. I think time will tell if AI translates into a recurring, sticky repeatable revenue stream because a lot of the AI activity today is revenue, but not annualized revenue. It’s not recurring revenue. It’s a high rate of churn. A lot of experimentation, pilot projects that are going on.”
Despite the uncertainty, he believes the most powerful players in the next phase of AI will be incumbent enterprise leaders with long-standing customer bases and contract depth.
“The one thing that people are discounting is that there is a fair amount of distribution and leverage and customer base and maturity in what an Adobe or a Salesforce or a ServiceNow or Workday are going to put out.”
Rangan emphasizes that these firms are positioned to generate sustainable income once AI services mature into enterprise staples.
“We’ve seen the early signs of some mature products that are coming out. And so those are the revenues that are held by contractual obligations that are really worthy of a multiple because they are profitable, repeating, contractually obligated.”
Disclaimer: Opinions expressed at CapitalAI Daily are not investment advice. Investors should do their own due diligence before making any decisions involving securities, cryptocurrencies, or digital assets. Your transfers and trades are at your own risk, and any losses you may incur are your responsibility. CapitalAI Daily does not recommend the buying or selling of any assets, nor is CapitalAI Daily an investment advisor. See our Editorial Standards and Terms of Use.