Over the next 10 years, AI could increase productivity by 1.5% per year. That could boost S&P 500 profits by 30% or more over the next decade, Goldman said.
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Goldman Sachs Bullish on artificial intelligence and believes the technology could help drive profits for the S&P 500 over the next decade.
“AI could increase productivity by 1.5% per year over the next 10 years. This could increase S&P 500 profits by 30% or more over the next 10 years,” said Goldman Sachs senior strategist Ben Snyder told CNBC on Thursday.
The advent of ChatGPT, a chatbot developed by OpenAI, has sparked a surge of interest in artificial intelligence and could disrupt many people’s daily lives. It also breathed new life into investors hungry for a new driver of profit growth at a time when rising borrowing costs and supply chain problems dampened optimism.
“Many of the tailwinds that have contributed to the (S&P 500) earnings expansion appear to be reversing,” Snyder told CNBC on “Squawk Box Asia.”
“But the real source of optimism right now is productivity gains through artificial intelligence.”
“It’s clear to most investors that the immediate winner is the tech sector,” Snyder added. “For investors, the real question is who will be the winner going forward.”
“In the tech bubble of 1999 or 2000, it was hard to imagine Facebook or Uber changing the way we live,” he noted.
Snyder advised investors to diversify their U.S. stock exposure across cyclical and defensive sectors, and touted attractive valuations in the energy and healthcare sectors.
In the short term, he said, he expects the Fed to have already done most of its tightening of monetary policy.
“The question is: In what ways will this continue to affect the economy going forward?” Snyder said. “In a worrying sign in the latest earnings season, S&P 500 companies are starting to scale back their corporate spending slightly.”
Higher interest rates could be one reason, he said.
“If interest rates are high, you as a company may be less willing to issue debt, so you may spend less. In fact, if we look at the S&P 500 buybacks, they were down 20% year-over-year in the first quarter of this year year – that’s a sign that perhaps we haven’t seen the full impact of this tightening cycle.”