Goldman Sachs believes that artificial intelligence can help drive the profits of S&P 500 companies in the next ten years.
The Wall Street giant said: “Over the next 10 years, artificial intelligence could increase productivity by 1.5% annually. This could increase the profits of S&P 500 companies by 30% or more over the next decade, according to the chief strategist.” Ben Snyder to CNBC, and Al Arabiya.net reviewed it.
This comes after the emergence of the ChatGPT chatbot, developed by OpenAI, sparked a firestorm of interest in artificial intelligence and potential disruptions in the daily lives of many. It also sparked new enthusiasm among investors eager for a new driver of earnings growth at a time when rising borrowing costs and supply chain problems dampened optimism.
“A lot of the positive factors that drove this expansion of the S&P 500 seem to be waning, but the real source of optimism right now is productivity improvements through artificial intelligence,” Snyder said.
“It’s clear to most investors that the immediate winners are in the technology sector. The real question for investors is who will be the winner in the future,” Snyder added.
“In 1999 or 2000 during the technology bubble, it was very difficult to imagine that Facebook and Uber would change the way we live our lives,” he said.
Snyder recommended that investors should spread their investments in US stocks into the cyclical and defensive sectors, and promote the energy and healthcare sectors for their attractive valuations.
In the shorter term, he said he expects the US Federal Reserve to have completed most of its monetary tightening.
He stressed that one of the signs of concern in the latest earnings season is that S&P 500 companies are starting to cut back a bit on spending. He said higher interest rates may be one reason.
He explained that with higher interest rates, companies will not like to borrow, and therefore may decline in spending. Indeed, if we look at share buybacks for S&P 500 companies, they were down 20% year over year in the first quarter of this year — one sign we may not have seen all the effects of this tightening cycle, according to Snyder.