Wall Street analysts have dismissed concerns about a potential bubble in the artificial intelligence (AI) sector, asserting that the industry’s growth is sustainable and could unlock an $8 trillion opportunity.
AI Investment Levels Sustainable, Analysts Say
In a note titled “The AI Spending Boom Is Not Too Big,” analysts from Goldman Sachs Group Inc., JPMorgan Chase & Co., and Wedbush Securities Inc. argued that the current AI investment levels are sustainable, as reported by Fortune on Thursday.
Analysts, including Joseph Briggs of Goldman Sachs, emphasized that effective deployment of AI would generate productivity gains exceeding current investments. They projected the present discounted value of U.S. capital revenue at $8 trillion, with reasonable estimates spanning $5 trillion to $19 trillion.
“Anticipated investment levels are sustainable, although the ultimate AI winners remain less clear.”
According to the JPMorgan team led by Samik Chatterjee, AI-related capital expenditures (capex) will see a significant increase this year and the next. Capex across AI “hyperscalers” is expected to grow by 60% this year and an additional 30% next year.
Goldman predicts that the capex from Alphabet‘s (NASDAQ:GOOG) (NASDAQ:GOOGL) Google, Amazon.com (NASDAQ:AMZN), Microsoft (NASDAQ:MSFT), and Meta Platforms (NASDAQ:META) alone will be around $300 billion this year.
Meanwhile, Daniel Ives of Wedbush emphasized the strong demand for Nvidia Corporation (NASDAQ:NVDA) chips, indicating that the AI revolution is still in its early stages.
AI Boom Sparks Debate On Bubble Risks
The AI industry has been the subject of intense debate in recent weeks. Earlier in October, Goldman Sachs’ equity strategist, Peter Oppenheimer, highlighted key differences in the current AI-driven tech boom that make this cycle fundamentally healthier than past financial bubbles. Despite soaring tech valuations, Oppenheimer argued that they are not as high as compared to the dot-com peak.
On the other hand, former Cisco Systems Inc. (NASDAQ:CSCO) CEO John Chambers warned of troubling similarities between today’s AI surge and the dot-com bubble, a sentiment echoed by other industry leaders.
Some industry leaders, including Jeff Bezos, David Solomon, and OpenAI CEO Sam Altman, have also warned of a potential AI bubble. However, macro investment expert Jim Bianco suggested that these tech leaders want the bubble to pop as a way to consolidate power.
Price Action: Some of the AI focused ETFs, Global X Artificial Intelligence & Technology ETF (NASDAQ:AIQ), Global X Robotics and Artificial Intelligence ETF (NASDAQ:BOTZ) and First Trust Nasdaq AI and Robotics ETF (NASDAQ:ROBT) surged 12.87%, 31.38% and 21.37%, respectively, on a year-to-date basis, as per data from Benzinga Pro.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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