Goldman Sachs CEO David Solomon warns stock market ‘drawdown' will follow AI boom

Core Viewpoint - Goldman Sachs CEO David Solomon cautioned that the current AI investment enthusiasm may be excessive, predicting a potential "drawdown" in stock markets within the next 12 to 24 months due to overvaluation and underperformance of many investments [1][4][5]. Investment Trends - Major US stock indexes have reached record highs this year, driven by optimism surrounding artificial intelligence, despite previous market fears related to tariffs [5][11]. - Significant capital has been funneled into tech stocks such as Microsoft, Alphabet, Palantir, and Nvidia, as these companies announce multi-billion dollar investments in AI [8]. Historical Context - Solomon drew parallels between the current AI investment climate and the internet boom of the late 1990s, which ultimately led to the "dot-com bubble" and subsequent market collapse [2][4]. - He emphasized that markets typically run in cycles, and rapid technological advancements often lead to over-exuberance in valuations [9]. Market Sentiment - Solomon noted that investor excitement can lead to a skewed perception of risks, where potential downsides are often overlooked [6][10]. - He acknowledged that while there will be both winners and losers in the AI sector, the overall potential of AI technology remains promising [10][11]. Future Outlook - Solomon expressed confidence in the long-term prospects of AI, highlighting the ongoing expansion of technology and the formation of new companies [11]. - He indicated that a market reset is inevitable, but the extent will depend on the duration of the current bull run [9].