A Goldman Sachs partner, Rich Privorotsky, has warned that a wave of artificial intelligence-fueled "creative destruction" is sweeping through industries worldwide in real time, representing a fundamental test of corporate moats.
From last week's turbulence in the software sector to early this week's impact on insurance and wealth management stocks, followed by real estate services and logistics later in the week, AI is aggressively testing which companies possess truly defensible competitive advantages. Initially seen as a tailwind for equity markets, AI is now scrutinizing business models with increasing intensity.
A "sell first, ask questions later" sentiment is spreading, accelerating sell-offs without clear catalysts beyond AI concerns. According to Privorotsky, this amounts to a moat examination: Can a company's business withstand technological disruption? Could an army of robots displace existing firms? Must companies race to invest or acquire, or risk being replaced?
Privorotsky further emphasized the need to monitor trigger signals from Commodity Trading Advisors (CTAs) in major U.S. indices. Goldman Sachs currently estimates that CTAs could sell $1.5 to $2 billion worth of U.S. stocks over the next week.
Software sector valuations are under pressure. Privorotsky noted that AI is exposing businesses that hoped to rely on stable returns, rather than delivering easy gains. In many sectors once considered to have strong moats, technological advances are rapidly eroding barriers built on experience and knowledge work, enabling new entrants to challenge incumbents quickly.
When AI concerns unsettle market sentiment, the terminal value of software and technology stocks comes into question—a core issue facing markets today. From his trading experience, Privorotsky pointed out that valuation multiples are among the hardest metrics to anchor; once doubted, the skepticism tends to persist.
Public company valuations have retreated from over 30 times earnings (blended forward 24-month estimates) to just above 20 times, while private investment portfolios often maintain much higher multiples. Consequently, turbulence has spread from public markets to private equity and further into private credit, particularly the leveraged loan market.
Market signals indicate a growth shock. Over the past week, U.S. Treasury yields declined while cyclical stocks sold off relative to defensive shares. Goldman Sachs observes that current conditions resemble a short-term growth shock, with the yield curve flattening and bonds continuing to rally.
U.S. January CPI rose 2.4% year-over-year, below expectations, while core CPI fell to a four-year low, easing inflation worries. This aligns with the narrative that AI may disrupt multiple industries faster than anticipated. Goldman suggests the ultimate outcome could be outright deflation in some sectors as "rent-seekers" lose pricing power.
In this environment, Privorotsky advises investors to seek companies with genuine moats and tangible assets. The aerospace sector appears timely, with Airbus-type exposure worth watching. Industrial stocks should perform well, but selectivity is key—focus on companies benefiting from investment cycles rather than short-cycle cyclicals.
Tangible assets represent a long opportunity, though chasing commodity spikes is not advisable. He favors European REITs/long German residential real estate but avoids office REITs. Banking stocks look vulnerable, facing four risks: in Europe, they are crowded long positions; they barely price in AI disruption or net interest margin compression; a weaker dollar in a disinflationary regime hurts rate curves; and in the U.S., prediction markets show a over 30% probability of a Democratic sweep, significantly raising regulatory risks.
Privorotsky highlighted the approaching CTA sell trigger levels for U.S. indices. In North America, the heaviest selling is expected not in the S&P 500 but in the Nasdaq 100. The S&P 500 has already broken below its 50-day moving average (6,895) and the CTA short-term threshold (6,911).
The good news is that selling pressure remains modest. Goldman estimates CTAs will sell $1.5–2 billion in U.S. equities next week. Additionally, the S&P 500 remains about 110 points above the mid-term threshold of 6,723; breaking that level would accelerate selling.
Privorotsky concluded that as AI lowers barriers to entry daily, markets are dividing winners from losers. While he cannot predict the future of shipping tomorrow, he is certain that terminal valuation multiples are under scrutiny—a structural concern. The current environment favors firms with real moats and tangible value. Emerging markets remain relatively clearer safe havens, with global trading continuing to drive relative outperformance.