Why Goldman Sachs says AI spending is sustainable (and why they could be wrong)

Crazy amounts of money are being thrown at AI right now, particularly on chips and power.

Analysts at Goldman Sachs have a funny way of saying it’s sustainable. They dismiss concerns, arguing investment levels are sustainable. Why? Because AI deployments are boosting productivity.

That’s a funny way of justifying it a day after Sam Altman announced that OpenAI will allow adult erotica on ChatGPT.

In any case, Goldman argues that AI capex is at roughly 1% of GDP in 2025 and will rise to 2-2.5% in 2027 and 2028. They estimate that generative AI could lift labor productivity by 1.5 percentage points annually as adoption spreads.

I think that’s all a bit fanciful as it’s entirely unclear that the people making the investments are the ones who will capture the ROI from the productivity boosts. Chips also have a very short life, so there could easily be a cash-incinerating time mismatch.

This article was written by Adam Button at investinglive.com.