Goldman’s Solomon warns ‘it’s not different this time’ as tech stocks hit new highs

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Goldman Sachs chief David Solomon has warned that a lot of capital being invested in artificial intelligence will “turn out not to deliver returns” but said it was still unclear whether the tech market was in a bubble.

The current AI investment boom has propelled the market value of Nvidia to a new peak of $4.6tn, as Silicon Valley giants pour hundreds of billions of dollars of investment into data centres, helping push US stocks to fresh record highs this week.

That will ultimately play out like other tech investment cycles, Solomon warned on Friday, even as he remained optimistic about AI’s potential.

Speaking at a conference in Italy on Friday, Solomon said that when the current cycle ends, “there will be a lot of capital that was deployed that didn’t deliver returns”.

“It’s not different this time. We just don’t know how that will play out,” he said.

Solomon told an audience at the Italian Tech Week conference in Turin that AI’s ability to boost productivity was “very exciting”, predicting that the “business of work will be transformed by AI globally”.

But the chief executive of the most prestigious US investment bank admitted he was “not smart enough to know” if investors’ excitement over AI had turned into a bubble.

“If you were having this conversation in 1998 you would have been asking the same question but the [market] would run for another three years,” he said.

“We are at the beginning of the movie not the end of the movie,” he added. “I wouldn’t be surprised if in the next 12-24 months we see a drawdown in equity markets but that shouldn’t be surprising given the run we’ve had.”

Big Tech groups are investing ahead of a projected leap in demand from businesses for AI tools, even though many companies are yet to see the promised returns on the technology.

Analysts at Citi this week raised forecasts for AI-related capital expenditures by Big Tech’s “hyperscalers” to $490bn next year, rising to $684bn by 2029.

Solomon said that companies were slowing hiring as they assessed how useful the technology could be, contributing to a US jobs market that was a “little bit soft”.

But he said that the US economy as a whole was “in pretty good shape”, as fiscal stimulus and AI data centre investment provided a “pretty good tailwind” despite trade policy uncertainty.

Beyond tech, the Wall Street boss also predicted that there would be an “acceleration” in dealmaking next year as US companies embraced the Trump administration’s light-touch approach to regulation.

Solomon said there was “real momentum in the dealmaking environment. I would say it’s accelerated very significantly,” he said.

“I think you are going to see an acceleration of that in to 2026 for sure. CEOs are testing the boundaries of their capabilities . . . I think the regulatory environment is going to permit that.”