Goldman Sachs Warns AI Hype Hasn't Yet Translated into Profits

Goldman Sachs finds that while AI-linked stocks are up 17% this year, the buzzword hasn't yet translated into profits. Only 58% of S&P 500 companies mentioned AI on earnings calls, but few tied it directly to profits. The bank maps the AI trade into four stages, with Phase 1 driven by Nvidia and Phase 2 powered by hyperscalers. However, the next two phases remain uncertain, as companies incorporate AI into products and industries see broad-based productivity gains.

Goldman Sachs has found that while AI-linked stocks are up 17% this year, the buzzword hasn't yet translated into profits. According to a recent note, only 58% of S&P 500 companies mentioned AI on their earnings calls, but few tied it directly to profits [1].

The bank maps the AI trade into four stages. Phase 1 was driven by Nvidia, the chipmaker powering AI models. Phase 2, where markets are now, is powered by the hyperscalers: Amazon, Microsoft, Google, Meta, and Oracle. Together, they're expected to spend $368 billion on capital projects in 2025, up from $239 billion in 2024 and $154 billion in 2023 [2].

However, the next two phases remain uncertain. Phase 3, in which companies incorporate AI into products to boost sales, is trickier. Some investors worry AI could hurt software-as-a-service firms by reducing prices and lowering barriers for new rivals. Phase 4 is the long-promised productivity boom, but the US economy is still in the "early innings" of AI adoption [2].

The risk, Goldman cautions, is that the hype gets too far ahead of reality. If AI spending reverted back to 2022 levels, Goldman estimates it would shave $1 trillion off 2026 sales forecasts — and wipe 15% to 20% off the S&P 500's value [2].

References:
[1] https://www.businessinsider.com/ai-company-earnings-calls-corporate-profits-bottom-line-goldman-sachs-2025-9
[2] https://www.ainvest.com/news/broadcom-contrarian-performance-stock-slipped-record-earnings-ai-momentum-2509/