Goldman Sachs Warns: AI Stocks Face Profitability Test as Infrastructure Phase Matures
1min read In recent developments, Goldman Sachs discussed the maturation of the AI trading journey, noting that the "second phase" focused on AI infrastructure is nearing maturity. This has resulted in stocks within this category experiencing notable growth. However, future growth will likely depend more on actual earnings rather than valuation increases.
AI stocks have witnessed increased volatility over the past six months, with recent rebounds drawing attention to the current state of investments. The "second phase" involves companies focusing on AI infrastructure, a sector that has surged by 27% this year. Goldman Sachs advises caution as the stocks might now rely heavily on tangible earnings performances.
This evolving landscape sees AI infrastructure companies as beneficiaries, with investments from tech giants like Amazon and Microsoft bolstering their stock performance. However, these high valuations might challenge future growth, shifting focus to profitability rather than mere valuation hikes.
As we approach the "third phase," the market is keenly observing companies that can capitalize on AI to generate incremental revenue. Nonetheless, Goldman Sachs warns that the timing for AI application development and monetization remains unclear. The firm suggests that while some "platform" stocks show promise, the sector overall requires careful examination.
Platform stocks present an attractive proposition within this third phase. Analysts highlight that these platforms, such as database and development tools, could lead the next wave of generative AI investments. This sector is positioned to optimally leverage AI infrastructure while establishing a foundation for new applications.
Looking ahead to the "fourth phase," companies that aim to significantly enhance productivity through AI are anticipated to see real gains. Currently, only a small percentage, about 6%, employ generative AI in production, marking a lower-than-expected adoption rate. Confidence in these stocks is likely contingent upon tangible advances from third-phase applications.
In summary, while the second phase of AI trading has garnered substantial interest and growth, transitioning into subsequent phases poses challenges, particularly in terms of application monetization and widespread adoption. Investors are advised to remain cautious and informed as the AI landscape continues to evolve. Market risks persist, and individual investment decisions should consider specific financial situations and goals.