New Economic 'Super Cycle' Spurred By AI And Decarbonization Is On The Horizon: Goldman Sachs Analyst

The global economy is poised to transition into a fresh phase of growth, propelled by the explosion of artificial intelligence (AI) and efforts towards decarbonization, says a Goldman Sachs analyst.

What Happened: Peter Oppenheimer, a Goldman Sachs analyst, conveyed this prediction during his appearance on CNBC’s “Squawk Box Europe,” reported Business Insider.

The current economic super cycle, characterized by a rapid expansion period, originated in the 1980s, according to Oppenheimer. This period of substantial growth was ignited when borrowing costs peaked, followed by nearly 35 years of low interest rates, deregulation of several industries, and globalization.

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The forthcoming super cycle, however, won’t rely on the same elements. Interest rates, for example, are not in a steep decline, and globalization is under scrutiny. Nevertheless, Oppenheimer sees potential in new drivers, such as the increasing influence of AI on productivity and initiatives towards decarbonization.

Last year, the AI surge propelled tech companies to dominate the market, with firms like Nvidia NVDA and Meta META experiencing three-figure gains in their stock prices. Despite a rocky start to 2024, Wall Street remains hopeful about AI’s future influence on markets.

Moreover, Oppenheimer suggests that those tech companies at the “epicenter” of the boom appear relatively inexpensive compared to tech giants from past bubbles. He adds, “They’re already much more profitable. So I think this is a story that can run and have quite a big impact for some time to come.”

The decarbonization narrative forms the second part of this new growth cycle. As the climate warms, economies are being compelled to restructure and modernize, a shift that typically ushers in a phase of economic growth.

Why It Matters: The fears of an AI bubble were debunked by Goldman Sachs in 2023, with Oppenheimer’s team declaring that AI technology was still in its infancy with the potential for continued outperformance in the future. This analysis came amidst concerns of a potential bubble in the AI sector due to the high performance of AI-related stocks.

As per a study by Goldman Sachs, AI investment is projected to reach $200 billion globally and $100 billion in the U.S. by 2025. The majority of these investments were anticipated to come from hardware investment for training AI models and increased expenditure on AI-enabled software.

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