Goldman boss David Solomon warns of a stock market drawdown: ‘People won't feel good'

Core Viewpoint - Goldman Sachs CEO David Solomon predicts a potential "drawdown" in stock markets within the next 12 to 24 months, following a period of record highs driven by an AI frenzy [1][5]. Market Dynamics - Markets operate in cycles, and significant technological advancements often lead to capital formation and the emergence of new companies, which can result in market overvaluation [2]. - The historical context of the internet boom in the late 1990s and early 2000s serves as a cautionary tale, highlighting both the creation of major companies and the losses incurred during the "dotcom bubble" [3]. AI Boom and Investment Trends - The recent AI boom has led to substantial investments in technology companies, with notable capital flowing into stocks like Microsoft, Alphabet, Palantir, and Nvidia [5]. - Despite the excitement surrounding AI, there are growing concerns about a potential market bubble, as investors may overlook risks while focusing on positive outcomes [6][8]. Expert Opinions - Solomon refrains from labeling the current situation as a bubble but acknowledges that investor enthusiasm can lead to increased risk-taking [7]. - Other industry leaders, including Jeff Bezos and Leon Cooperman, express similar concerns about the current market conditions, suggesting that the AI sector may be experiencing an "industrial bubble" [9]. - Karim Moussalem warns of significant risks associated with the AI trade, likening it to historical speculative manias [10]. Optimism Amidst Caution - Despite the anticipated drawdown and potential losses, Solomon maintains an optimistic outlook on the future of artificial intelligence, emphasizing the technology's expanding potential and the formation of new companies [11].