Over the next 10 years, AI can increase productivity by 1.5% per year. And that could boost the S&P500’s profits by 30% or more over the next decade, Goldman Sachs said.
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Goldman book is optimistic about artificial intelligence and believes the technology can help turn the S&P 500 into profits over the next 10 years.
“Over the next 10 years, AI could increase productivity by 1.5% per year. And that could boost S&P500 profits by 30% or more over the next decade,” said senior strategist Ben Snider of the S&P 500. Goldman told CNBC on Thursday.
The emergence of ChatGPT, the chatbot developed by OpenAI, has fueled a storm of interest in AI and the possible disruptions to many people’s daily lives. It has also created renewed excitement for investors looking for a new driver of earnings growth at a time when rising borrowing costs and supply chain problems have dampened optimism.
“A lot of the factors favorable to the (S&P 500) earnings expansion appear to be reversing,” Snider told CNBC of “Asian Squawk Box.”
“But the real source of optimism right now is enhancing productivity through artificial intelligence.”
“It is clear to most investors that the immediate winners are in the technology sector,” added Snider. “The real question for investors is who will win in the future.”
He points out that “in 1999 or 2000 during the tech bubble, it would be difficult to envision Facebook or Uber changing the way we live.”
Snider recommends that investors spread their U.S. equity investments into cyclical and defensive sectors, touting the energy and health care sectors because of its valuation. their attractive prices.
In the short term, he said he expects the US Federal Reserve to have most of its tightening monetary policy done.
“The question is: How will that continue to affect the economy going forward?” Snider said. “One worrisome sign in recent earnings season is that S&P 500 companies are starting to ease corporate spending a bit.”
Rising interest rates could be one reason, he said.
“If interest rates are high, as a company you might be a little more reluctant to issue debt and so you can pull back on your spending. And indeed, if we look at buybacks, in the S&P 500, they’re down 20% year over year in the first quarter of this year — it’s a sign we’re probably not seeing the full impact of this tightening cycle yet.”
