Goldman Sachs: AI capex peak growth nearing, theme turns two-sided

According to a Wall Street CN report, three senior Goldman Sachs professionals recorded a podcast on October 29 in which they argued that the peak pace of AI capital spending is probably close at hand, and that markets have shifted from one-sided optimism on AI toward a two-sided game that prices in both positive and negative outcomes. They also suggested that the Fed's actual rate increases may be smaller than what markets are currently pricing in. The episode, titled "The Breaks of the Game," was recorded just after the big technology earnings week. It featured Goldman Sachs Global Hedge Fund Coverage Head Tony Pasquariello, Global Risk Head Josh Schiffrin, and Dominic Wilson, Senior Advisor at Goldman Sachs Research, who reviewed the evolution of the AI capital expenditure narrative, the Fed's path, and the macro risk wall. Wilson said that AI has moved from a "supercharging theme" to a "more conventional narrative," and that the peak of growth rates is "probably quite close." The backdrop to this view is that the S&P 500 has been essentially flat over the past six months, and the Nasdaq has done the same. Pasquariello noted that this earnings season looked "decent on the surface," but the upward revisions to forward earnings were far smaller than in the earlier Q1 and Q2 periods, "enough to hold the line, but not enough to ignite another breakout rally."