Goldman Sachs: AI Risks Intensify Debate on Stock Valuations

On April 28, strategists at Goldman Sachs stated that the disruptive risks posed by artificial intelligence (AI) are intensifying the market debate over stock valuations. The team, led by Ryan Hammond, believes that ‘the perceived threat of AI disruption has made investors more focused on the ‘terminal value’ of many stocks.’ Their analysis, based on a 10-year dividend discount model, shows that ‘the terminal value of the S&P 500 index currently accounts for about 75% of its overall equity value, close to the highest level in the past 25 years.’ The strategists specifically mentioned the recent underperformance of software stocks and other ‘light asset’ industries. ‘For these stocks, which have a value highly concentrated in the distant future, the recent sharp decline in share prices contrasts sharply with robust short-term earnings, further highlighting the importance of long-term growth prospects.’ (Dongxin News Agency)