Good morning. David Solomon, chair and CEO of Goldman Sachs, leads one of the world’s most prominent investment banks and sees AI as a key growth driver, though he cautions the path ahead won’t be straightforward.
Speaking at the Economic Club of Washington, D.C., on Thursday in a conversation with Carlyle Group co-founder David Rubenstein, Solomon discussed the state of the U.S. economy, the impact of rising public debt, and the AI investment boom in front of a packed audience.
An outlook on growth
Goldman Sachs (No. 32 on the Fortune 500) recently reported stronger-than-expected third-quarter earnings, driven by robust investment banking fees and trading revenue. When Rubenstein asked Solomon whether the U.S. faces a near-term recession, Solomon offered cautious optimism.
“We’ve got a big, diverse economy,” he said. “It’s in pretty good shape at the moment. There are things we cannot see that could set it off, but I think the chance of a recession in the near term is low.” Solomon pointed to the buildout of AI infrastructure as a key force supporting growth.
“You have six or seven large companies that are going to spend $350 billion [combined] this year on AI infrastructure—that has an effect on growth,” he said. As AI becomes integrated into enterprise operations, Solomon expects meaningful productivity gains.
Turning to the country’s rising debt burden, Solomon said it will result in a “reckoning” if the economy does not grow faster. “The path out really isn’t a revenue path out,” he said. “The path out is a growth path.”
The AI boom
When Rubenstein asked whether the massive market capitalizations of major tech firms, some nearing $5 trillion, signal a potential bubble, Solomon offered a historical perspective.
“Whenever you have an acceleration in technology and people get excited about it, you see significant capital formation by new companies trying to capitalize on that opportunity,” he said. “We’ve seen this before through history.” He added, “It won’t be a straight line.” Solomon further discussed today’s AI wave.
The opportunity set with AI is “enormous,” he said. “There will be winners and losers, and it’s hard to pick them now.” A lot of the capital being deployed will not produce adequate returns—and some won’t produce any returns at all, he added.
Reflecting on past investment cycles, Solomon recalled then-Fed Chair Alan Greenspan’s famous warning about “irrational exuberance” in 1996.
“At that time, the Nasdaq was near 1,300,” Solomon explained. “About three and a half years later, it rose above 5,000. Ultimately, there were adjustments and drawdowns.” The trend for AI investment is real, he said. “There’s real productivity—but these things never move in a straight line,” he added.
Solomon’s remarks reflect a broader theme across Wall Street: optimism about AI’s potential to drive growth, tempered by awareness that not every investor, or company, will come out ahead.
Have a good weekend.
Sheryl Estrada
sheryl.estrada@fortune.com
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