Goldman Sachs (GS) CEO David Solomon is warning investors that a stock market downturn is coming.
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Solomon, who heads the influential Wall Street investment bank, says stocks are due for a “drawdown” in the next year or two after being propelled to record highs by a frenzy in all things related to artificial intelligence (AI).
“Markets run in cycles, and whenever we’ve historically had a significant acceleration in a new technology that creates a lot of capital formation, and therefore lots of interesting new companies around it, you generally see the market run ahead of the potential… there are going to be winners and losers,” said Solomon at a technology conference in Italy.
Potential Bubble?
Solomon made allusions to a bubble forming in AI stocks, drawing parallels to the bubble in internet stocks that formed in the late 1990s and early 2000s, which led to the emergence of some of the world’s largest companies but also the implosion of many concerns and their stocks.
“You’re going to see a similar phenomenon here,” said Solomon. “I wouldn’t be surprised if in the next 12 to 24 months, we see a drawdown with respect to equity markets… I think that there will be a lot of capital that’s deployed that will turn out to not deliver returns, and when that happens, people won’t feel good.”
Solomon is not the only U.S. business leader to raise concerns about the current stock market. At the same conference, Amazon (AMZN) founder Jeff Bezos said he believes that AI is currently in what he called an “industrial bubble.”
Is GS Stock a Buy?
The stock of Goldman Sachs has a consensus Moderate Buy rating among 13 Wall Street analysts. That rating is based on six Buy, six Hold, and one Sell recommendations issued in the last three months. The average GS price target of $769.22 implies 1.63% downside from current levels.
