Mars Finance News, June 17 — Goldman Sachs believes that the world is transitioning from a "modern" supercycle characterized by low inflation, low interest rates, and globalization to a "post-modern" cycle with higher macro volatility, higher real interest rates, increased government intervention, and more regionalization. In this environment, the era of returns driven by valuation expansion is coming to an end, and earnings growth per share will become the core variable influencing market performance. Goldman Sachs strategists Peter Oppenheimer, Sharon Bell, and others stated in a report titled "Post-Modern Cycle: Navigating Capital Expenditure Booms" that higher capital costs are suppressing valuation multiple expansion, cross-sectional dispersion of market returns is increasing, and strategies relying solely on beta exposure will face greater challenges, while active stock selection and alpha generation will become significantly more valuable. The report suggests that the wave of private capital expenditure driven by the AI revolution, combined with increased government public investment fueled by geopolitical factors, is forming a super cycle of capital spending. Goldman Sachs data shows that in Q1 2026, the capital expenditure of S&P 500 components is expected to grow 38% year-over-year, while buybacks are only increasing by 1%, reversing the post-financial crisis trend where companies relied more on buybacks than capital expenditure. Regarding AI spending, Goldman Sachs’s consensus estimates indicate that Amazon, Meta, Google, Microsoft, and Oracle are expected to collectively spend about $75.5 billion on capital expenditures in 2026, approximately 80% higher than a year earlier, and about 84% higher than actual spending in 2025, with further growth to around $92 billion projected for 2027. Goldman Sachs points out that the momentum of capital expenditure is spreading from data centers to energy, industrial, and infrastructure sectors. Goldman Sachs states that the growth of tech giants is increasingly dependent on physical infrastructure such as data centers and power supplies, which will create a "cascading effect," leading capital expenditure to spill over into traditional value sectors like industry, energy, and utilities. Meanwhile, geopolitical factors driving increased defense spending also support demand for traditional defense equipment such as aircraft, tanks, munitions, and ships. Goldman Sachs reaffirms its preference for stocks benefiting from capital expenditure and recommends four thematic investment baskets: artificial intelligence, defense spending, power and electrification, and HALO (high-asset stocks). Goldman Sachs believes that overall index-level returns may become more subdued in the future, but relative returns across regions, sectors, and styles will diverge more widely, ushering in a new era where active management and alpha generation are more valuable.

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Goldman Sachs interprets the "Postmodern" investment cycle: AI and geopolitics are driving a supercycle of capital expenditure

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