AI spending boom is boosting profits now, but could pressure Big Tech returns later: Goldman Sachs

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• Apple is expected to experience the sharpest ROE drop next year, followed by Nvidia, Alphabet and Meta

  60% confidence

• The broader productivity benefits of AI could ultimately offset near-term headwinds from AI infrastructure spending on Big Tech profitability

  60% confidence

• Economics for AI models are expected to improve as computing costs per token decline while pricing stabilizes

  60% confidence

• Semiconductor net profit margins are approaching 50%, supported by pricing power and strong competitive positions

  60% confidence

• Depreciation and amortization expenses for hyperscalers will rise from 7% of revenue in 2022 to 12% by 2027

  60% confidence

• Consensus forecasts imply that return on equity for the largest technology companies will decline by an average of seven percentage points next year

  60% confidence

• More than half of S&P 500 companies discussed AI-related productivity initiatives during recent earnings calls, though relatively few have yet quantified the financial impact

  60% confidence

• Improving revenue estimates, growing customer backlogs and expanding margins among major cloud providers are evidence that AI investments are beginning to generate returns

  60% confidence

• AI adoption will eventually increase revenue and earnings per employee across corporate America

  60% confidence

• The S&P 500 has returned 9% year-to-date despite a decline in valuation multiples, with consensus forward 12-month earnings estimates rising 17% while the P/E ratio contracted from 22x to 21x

  60% confidence

• Major cloud operators will spend roughly $770 billion on capital expenditures in 2026, equivalent to about 100% of their operating cash flow

  60% confidence

• Every one percentage point change in S&P 500 ROE is associated with roughly a one-turn change in the market's P/E multiple

  60% confidence

• The S&P 500 currently trades at about 21 times forward earnings, a level that ranks in the 87th percentile since 1980, while return on equity has climbed to a record 22%

  60% confidence

• The seven largest technology stocks collectively generate a 44% return on equity, up nine percentage points over the past three years

  60% confidence

• Record corporate profitability has become a key pillar supporting elevated U.S. stock valuations

  60% confidence

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