Goldman Sachs' top strategist says there is an AI bubble — but not where everyone thinks (markets.businessinsider.com)

Goldman Sachs' chief US equity strategist, David Kostin, recently stated that the real bubble in AI is forming in private markets rather than in publicly traded stocks. During an episode of the firm's "Exchanges" podcast, Kostin highlighted that private AI firms are experiencing unsustainable valuations driven by excessive capital inflows and growth expectations, contrasting with public companies like Nvidia, where stock price increases have directly matched earnings growth. This points to a more stable market environment for publicly listed AI companies, which do not exhibit the classic signs of a bubble. Kostin criticized the prevailing investor anxiety regarding a potential AI stock market bubble, arguing that the true risk lies in private markets. He referenced George Soros's concept of reflexivity, suggesting that the rise in private valuations is primarily based on heightened growth expectations rather than solid fundamentals. He warned of potential vulnerabilities from circular or vendor financing, where growth hinges on external funding that could falter. This analysis underscores the need for stakeholders in the AI/ML community to closely monitor private market dynamics, as inflated valuations could impact long-term sustainability and investment strategies in the sector.