Goldman Sachs says this is 'a key indicator for the durability of the AI trade'
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Goldman Sachs analysts have identified sales revisions as a key measure for assessing the longevity of the AI trade. The AI sector has experienced significant growth, particularly in the infrastructure phase, but skepticism remains about its long-term profitability. Phase 2 companies involved in AI infrastructure have shown robust performance, with an average return of 26% YTD. However, there is growing scrutiny on the potential returns from AI investment spending. Phase 3 companies, expected to monetize AI through software and IT services, have seen volatile performance, with a 19% decline in stock prices between February and May. Sales revisions will be a key indicator for investors to assess the durability of the AI trade. The upcoming earnings season will be a critical test for investor optimism, and companies involved in AI must demonstrate tangible sales and earnings growth to sustain their valuations. The AI capex cycle is still smaller than the Tech Bubble era. Investors are advised to closely monitor earnings reports and sales projections to gauge the long-term viability of AI-driven growth.
https://www.investing.com/news/stock-market-news/goldman-sachs-says-this-is-a-key-indicator-for-the-durability-of-the-ai-trade-432SI-3518210
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