Goldman Sachs – AI: To buy, or not to buy, that is the question

The technology sector has been a major driver of global and US equity market returns since 2010, with EPS rising significantly compared to other sectors. However, the introduction of transformative technologies can lead to bubbles as investor enthusiasm grows and stock prices increase. Investors often focus too much on the originators of these technologies and underestimate competition and new entrants to the industry. Valuations may also understate opportunities in non-technology industries that can leverage technology for higher returns. While the technology sector is not currently in a bubble, there are concentration risks that investors should be aware of. Diversifying exposure to include smaller technology companies and other parts of the market can improve risk-adjusted returns and provide access to potential winners. Additionally, opportunities may arise in the old economy as infrastructure spending increases.