Goldman Sachs says tech-led equity rally not a bubble, yet.
Global equity markets, and particularly technology stocks, are showing early signs that resemble past financial bubbles, according to Peter Oppenheimer, chief global equity strategist at Goldman Sachs Research. But key structural differences set the current cycle apart, suggesting valuations remain broadly underpinned by fundamentals rather than speculation.
In a new note, Oppenheimer writes that the sharp rise in tech and AI-related valuations has largely been driven by robust earnings from established companies, rather than debt-fueled startups:
- the market’s gains reflect sound fundamentals, not rampant speculation or unsustainable leverage
While acknowledging that market concentration is high, Oppenheimer notes that similar dominance cycles, such as those once seen in the finance and energy sectors, have lasted decades without triggering crises. He also points out that capital expenditures are being financed internally rather than through borrowing, keeping systemic risks contained.
- on balance, valuations are looking increasingly stretched
- valuations are not yet at the levels typical of past bubble periods
- biggest risk is that earnings disappoint and investors start to question the sustainability of their current rates of return
