The artificial intelligence boom is driving Wall Street on a "record-breaking journey"—but investment bank Goldman Sachs warned in a Sunday research note that markets may have grown overly optimistic. The AI frenzy has recently added hundreds of billions in stock market capitalization, but analysts cautioned that much of the potential upside may already be priced in.

"Investors often go to extremes during innovation phases—they over-aggregate and extrapolate trends," the analysts wrote. "While individual companies may achieve astonishing profit growth at certain stages, this doesn’t necessarily apply to the entire sector." Goldman Sachs noted that if investors assume numerous players across the AI value chain will deliver high-profit growth, it could lead to overestimated revenue and earnings expectations at the market level.

**Unsustainable Profit Growth** Another key risk highlighted by analysts is the market’s mistaken belief that early gains can persist indefinitely. While initial productivity boosts may lift profits, competitive pressures and new investments typically erode these advantages over time.

The report comes as debates continue over whether the AI-driven stock rally shows bubble characteristics. Major U.S. stock indices have repeatedly hit record highs this year, though a pullback occurred earlier this month.

Goldman estimates AI could generate roughly $800 billion in additional revenue for U.S. firms, with a total potential value between $500 billion and $1.9 trillion. However, the report didn’t specify a timeline for these projections. "These potential benefits justify current and planned investment spending," it stated.

Analysts emphasized that since ChatGPT’s launch, AI-related companies have added over $1.9 trillion in market cap—suggesting markets may have already priced in much of the optimism. While forward-looking pricing is normal, current valuations "have surpassed macroeconomic reality." The core issue: sustaining high valuations requires robust economic fundamentals, and any slowdown or cycle shift could trigger significant losses.

**No Bubble Call, But Caution Urged** Despite these risks, Goldman stopped short of labeling the AI stock surge a bubble. "As long as the economy and AI investment momentum remain stable, we expect optimism to persist," they wrote. Yet with tech sector valuations elevated, investors remain nervous—questioning whether massive AI investments will yield sustainable returns or create the next bubble.

Last week, JPMorgan also warned that the AI frenzy risks mirroring the late-1990s dot-com bubble. "Back then, vast sums were invested without clear paths to implementation—precisely the challenge AI faces today," its analysts noted.