Goldman Sachs reported its first-quarter results on Monday, surprising analysts with an outstanding result. The Wall Street giant’s profits rose 28% from a year ago, helped by a 32% rise in investment banking fees. In the company’s subsequent conference call with analysts, CEO David Solomon said something about the growth of Goldman’s business – and his comments were likely well received by AI bulls.
He noted that Goldman is already working with clients to discuss how and when the new technology will impact their business, the labor market or the regulatory landscape. Solomon also said he expects there will be significant demand for AI-related restructuring and infrastructure projects, and therefore financing, in the longer term, providing a tailwind for Goldman’s business.
“I actually think there are very, very constructive opportunities for us with our clients as people reposition their businesses – and we’re talking on a scale that is, quite frankly, unprecedented,” he told analysts. “I think this opportunity is … not a quarter-by-quarter thing, it’s in the next five to 10 years, and we’re very, very focused on it and very committed to it.”
Solomon also pointed out that it’s not just companies driving the rise of AI, but also governments that are getting involved at scale and making “tremendous investments to deliver the infrastructure in their locations.”
Government spending on AI is something that tech bulls like Erika Klauer, technology equity portfolio manager at Jennison Associates, have done before told Assets will help boost some key AI-related stocks in the coming years. “[Nation-states] would like to have their own version of ChatGPT, with training in their own languages… their own archives, their own cultural nuances,” she explained last month. “And so these governments are coming to look for their own AI initiatives – and that’s an extraordinary opportunity.”
The opportunity within AI is so great – and so talked about – that analysts on the company’s earnings call Monday asked Goldman’s Solomon for comparisons to the dot-com era of the late ’90s and early 2000s.
The CEO declined to comment on this comparison, but noted that big tech companies have dominated the AI market so far. “We have a large market capitalization driven by large platforms that have a huge competitive advantage in scaling these technologies,” he said.
Solomon also said that Goldman, like most large companies, is expanding its use of AI internally. The CEO sees “tremendous opportunities” for productivity and efficiency gains in the business due to the technology, but “as with any new technology, a thoughtful approach and keen eye to risk management will be critical,” he added.
The risks of using AI also concerned his CEO colleague Walter Bettinger II when he answered analysts’ questions in Charles Schwab’s conference call on Monday. He believes AI represents a great opportunity for the economy, his customers and his company, but there are serious risks that need to be considered – such as AI’s propensity to hallucinate – and the hype may be a bit overblown.
Companies, particularly financial firms, will still have a lot of work to do with regulators before they can use AI “without the inherent biases that you sometimes see,” according to Bettinger.
“If you move to something like generative AI, I think it will take a while for that technology to mature. I know this may not fit the hype some are talking about, but I think the technology needs to become more sophisticated,” he added.