Goldman Sachs CEO David Solomon's big warning — Markets will see ‘drawdown’ in next 1-2 years

Some people will likely lose money in the coming “drawdown” from the artificial intelligence (AI) boom in the equity markets, according to Goldman Sachs CEO David Solomon, CNBC reported.

The stock markets have jumped to record highs thanks to AI, but as with the nature of market cycles, Solomon feels that over the next one to two years, “there are going to be winners and losers”, it said.

‘Won’t be surprised if we see drawdown in equity markets…’

Speaking at the Italian Tech Week in Turin, Italy on October 3, CNBC reported Solomon giving the example of the early 2000s dotcom bubble, as a point of reference for how he views AI's market boom.

“Markets run in cycles, and whenever we’ve historically had a significant acceleration in a new technology that creates a lot of capital formation, and therefore lots of interesting new companies around it, you generally see the market run ahead of the potential ... there are going to be winners and losers,” he said. He added that mass adoption of the internet in the late 1990s and early 2000s created tech giants, but also led to the “dotcom bubble”.

“You’re going to see a similar phenomenon here. I wouldn’t be surprised if in the next 12 to 24 months, we see a drawdown with respect to equity markets ... I think that there will be a lot of capital that’s deployed that will turn out to not deliver returns, and when that happens, people won’t feel good,” Solomon said.

‘Not going to says bubble, but people on risk curve’

Solomon added that he was resistant to calling the AI boom a “bubble”, but was cautioned investors, “I’m not going to use the word bubble, because I don’t know, I don’t know what the path will be, but I do know people are out on the risk curve because they’re excited.”

“And when [investors are] excited, they tend to think about the good things that can go right, and they diminish the things you should be sceptical about that can go wrong ... There will be a reset, there will be a check at some point, there will be a drawdown. The extent of that will depend on how long this [bull run] goes,” he added.

However, when it came to his view on AI as a whole, Solomon was optimistic and excited. “I sleep very well. I’m not going to bed every night worried about what will happen next. Generally speaking, I think what’s super exciting is the technology is expanding, new companies are being formed, and the potential of this technology deployed into the enterprise can be very, very powerful. So, it’s an exciting time,” he added.