AI-driven gains could send S&P 500 earnings up 30%

  • “Over the next 10 years, AI could increase productivity by 1.5% per year,” Ben Snyder, chief strategist at Goldman Sachs, told CNBC on Thursday. “That could boost S&P500 earnings by 30% or more over the next decade.” .
  • Technology companies are the immediate winners, he added, but “the real question for investors is who will be the winner in the future.”
  • Snyder recommended that investors should spread their US equity investments in the cyclical and defensive sectors, and promote the energy and healthcare sectors for their attractive valuations.

Over the next ten years, AI could increase productivity by 1.5% annually. That could boost S&P500 earnings by 30 percent or more over the next decade, says Goldman Sachs.

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Goldman Sachs is optimistic about artificial intelligence and believes the technology can help drive S&P 500 earnings in the next 10 years.

“Over the next 10 years, AI could increase productivity by 1.5% per year,” Ben Snyder, chief strategist at Goldman, told CNBC on Thursday. “That could boost S&P500 earnings by 30% or more over the next decade.” .

The emergence of ChatGPT, a chatbot developed by OpenAI, has sparked a firestorm of interest in artificial intelligence and potential disruptions to the daily lives of many. It also sparked new enthusiasm among investors eager for a new driver of earnings growth at a time when rising borrowing costs and supply chain problems tempered optimism.

“It looks like a lot of the positive factors that drove this expansion of (the S&P 500) earnings are coming down,” Snyder told CNBC’s “Asia Squash Box.”

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“But the real source of optimism right now is productivity improvements through AI.”

“It’s clear to most investors that the immediate winners are in the technology sector,” Snyder added. “The real question for investors is who will be the winner in the future.”

“In 1999 or 2000 during the tech bubble, it would be very difficult to imagine Facebook or Uber changing the way we live our lives,” he noted.

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Snyder recommended that investors should spread their US equity investments in the cyclical and defensive sectors, and promote the energy and healthcare sectors for their attractive valuations.

In the shorter term, he said he expects the US Federal Reserve to have completed most of its monetary policy tightening.

“The question is: In what ways will this continue to affect the economy going forward?” Snyder said. “One of the signs of concern in recent earnings season is that S&P 500 companies are starting to pull back a little bit on corporate spending.”

He said higher interest rates may be one reason.

“If interest rates are high, as a company, you may be more averse to issuing debt and therefore may hold back on your spending. And in fact if we look at the S&P 500 buybacks, they’re down 20% year-over-year in the first quarter of this year– This is one sign we may not be seeing all the effects of this tightening cycle.”

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