Goldman Sachs is warning that the S&P 500 could tumble into bear market territory if Big Tech’s record AI spending spree starts to slow.
In a new research note, analysts at the banking titan estimate that hyperscaler investment has already reached $368 billion this year, with Amazon, Alphabet, Microsoft, Meta, and Oracle driving the boom, Forbes reports.
Goldman projects that AI companies will drive $1 trillion in total sales growth across the S&P 500 companies next year. But the prediction will not come to fruition if the firehose of AI money tapers off.
In an extreme scenario, Goldman envisions hyperscalers cutting capex back to 2022 levels – a move that could lead to significant losses for AI companies depending on Big Tech spending. The slowdown in investments could trigger a full-blown bear market for the S&P 500.
Says Goldman,
“A reversion of long-term growth estimates back to early 2023 levels would imply 15%–20% downside to the current valuation multiple of the S&P 500.”
Analysts currently expect the deceleration in AI spending to appear in late 2025 or 2026, though companies continue to revise guidance.
“But expect that date to slip: Hyperscaler companies keep revising their capex guidance upward.”
For now, Goldman Sachs says that while valuations are high, they remain below previous bubbles.
“The five largest stocks in the index (NVDA, MSFT, AAPL, GOOGL, AMZN) trade at P/E multiple of 28x, compared with 40x at the peak in 2021 and 50x at the peak in the Tech Bubble [of 2000].”
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