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AI INVESTMENT FLOOD? GOLDMAN SACHS SAYS KEEP IT COMING

The flood of multibillion-dollar investments pouring into U.S. artificial intelligence infrastructure is sustainable, according to Goldman Sachs, pushing back on mounting concerns that the sector's spending spree could be overheating.

"AI investment as a share of US GDP is smaller today 1% than in prior large technology cycles 2-5%," Joseph Briggs, an economist for Goldman Sachs' global economics research, writes in a note dated Wednesday.

Goldman Sachs estimated the present discounted value of capital revenue unlocked by AI-driven productivity gains in the U.S. could reach $8 trillion, with plausible scenarios ranging from $5 trillion to $19 trillion. "These estimates exceed current cumulative AI investment forecasts even before considering foreign profits, new profit pools, or the potential of artificial general intelligence (AGI)," Briggs writes.

The report follows a wave of fresh announcements, including OpenAI's $300 billion deal with Oracle ORCL.N, $100 billion investment from Nvidia NVDA.O, and strategic partnerships with AMD AMD.O and Broadcom AVGO.O to deploy billions of dollars in GPUs and custom chips. According to Goldman Sachs, annualized AI-related spending in the U.S. has jumped by roughly $300 billion since 2023.

While the overall macroeconomic case for AI investment remains strong, the firm cautioned that "the ultimate AI winners remain less clear," with fast technological change and low switching costs potentially limiting first-mover advantages.

"Effective AI adoption may take time as companies figure out how to incorporate specific applications into business processes but AI can deliver sizable productivity gains once this occurs," Briggs added.


(Akriti Shah)

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