Source: Jin Ten Data Despite growing concerns among analysts and investors that investments in artificial intelligence resemble the internet bubble of 2000, Goldman Sachs disagrees. In a report to investors this week, the financial services firm asserted that the AI narrative is just beginning and that the substantial investments currently being made will ultimately yield benefits far exceeding expectations. Analysts noted, “The immense economic value promised by generative AI justifies current investment in AI infrastructure, and as long as companies foresee today’s investments generating excess returns in the long term, the overall level of AI investment appears sustainable.” Goldman Sachs believes that the long-term value generated by AI in improving productivity will outweigh initial costs by a significant margin. The firm claims that widespread AI adoption could add $20 trillion in value to the U.S. economy over the long term, stating that AI has already begun to enhance productivity if deployed effectively. Not everyone shares this view. Nick Clegg, a former executive at Meta and a British politician, expressed to CNBC that he anticipates a “considerable” correction in the AI market, adding, “There’s a kind of absolute frenzy going on right now, with trading happening almost every day and hour.” A recent survey by Bank of America indicates that the AI bubble is perceived as the largest “tail risk,” followed by concerns about inflation resurgence, loss of Federal Reserve independence, and dollar depreciation, with “going long on gold” considered the most crowded trade. Bank of America strategist Michael Hartnett stated that unease over AI and worries about the private credit market are dampening “overall bullish sentiment.” However, Goldman Sachs disagrees with this perspective. The firm argues that, given potential long-term returns, current AI capital expenditures are not a matter for concern, but rather appropriate. Goldman stated, “Generative AI seems poised to rapidly accelerate task automation, thus saving labor costs and enhancing productivity. Our baseline estimates indicate that once fully adopted, labor productivity across the U.S. economy will increase by a total of 15%.” Goldman anticipates that this widespread adoption will be achieved within the next decade. The firm pointed out that the only potential hurdle may be that investors are heavily betting on certain companies in the early stages of this process. In this competitive landscape, being a first mover doesn’t always guarantee long-term success. Goldman analysts wrote, “The current market structure for AI offers little clarity on whether today’s AI leaders will emerge as long-term winners.”

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