Goldman Sachs: AI Risks Are Intensifying the Debate Over Stock Valuations

The team led by Ryan Hammond believes: "The perceived threat of AI disruption among investors is causing them to pay more attention to the 'terminal value' of many stocks." Based on their analysis using a 10-year dividend discount model, "the terminal value of the S&P 500 currently accounts for about 75% of its overall equity value, approaching the highest level in the past 25 years." The strategists specifically mentioned the recent decline in software stocks and other 'light-asset' sectors. "For stocks whose value is highly concentrated in the distant future, the recent sharp drop in share prices stands in stark contrast to resilient short-term earnings, which further highlights the importance of long-term growth prospects."