Back

This part gave me a grim chuckle (this is 404 Media, inner quote is from Goldman):

“The paper ultimately questions whether generative AI will ever become the transformative technology that SV and large portions of the stock market are currently betting on, but says investors may continue to get rich anyway. ‘Despite these concerns and constraints, we still see room for the AI theme to run, either because AI starts to deliver on its promise, or because bubbles take a long time to burst.‘”

2/

The just-surprising part: Goldman Sachs argues that AI so is hyped right now that optimism about it casts a shadow over •the entire stock market• for the next decade:

Even if AI does manage to boost productivity, “we find that stocks often anticipate higher productivity growth before it materializes…Using our new long-term return forecasting framework, we find that a very favorable AI scenario may be required for the S&P 500 to deliver above-average returns in the coming decade”

3/

IOW, they think the entire stock market is already priced as if the alleged AI miracle is guaranteed to materialize. And if it doesn’t, well…then everything, everything is overpriced. “Outside of the most bullish AI scenario…we forecast that S&P 500 returns would be below their post-1950 average.“

Even I, an AI cynic, am skeptical that AI hype has managed to overprice the •entire stock market• that severely. But then again, maybe I’m overestimating investors.

4/

I suspect many people will say (1) “fuck Goldman Sachs” and (2) “who cares about the stock market, it’s not people.” To that I say (1) sure and (2) like it or not, this is a quantitative measure of forces that are shaping all of our human realities.

Gullible people are building castles that are maybe (very probably, imo) castles made of sand — and they’re putting us inside them, like it or not.

When business punches itself in the face, it’s not the people in power who bleed.

5/

And what about Goldman Sachs themselves? If they think AI might be overhyped, are they putting their money where their mouth is? @dekk provides the answer with this old gem: https://hachyderm.io/@dekk/112777129969989267

I suppose if “we’re in a bubble” were more actionable information, then bubbles would be less likely. Maybe one day, we’ll figure that out.

In the meantime, I can only long for a less investor-driven world.

/end

@inthehands
1. For the S&P 500 to be overpriced not *everything* indexed to it has to be, just the overweight, over-AI'd tech stocks. A strong enough correction (one is due) will average the entire index down. Investment strategy: underweigh tech portfolio.

2. Post-1950 annual returns may be unattainable because of a second phenomenon Goldman Sachs completely ignores: climate crisis.