AI Spending Shocks Will Continue Until At Least 2028, Goldman Sachs Warns
Goldman Sachs' Eric Sheridan expects AI spending shocks to continue until at least 2028, as demand for infrastructure outpaces supply. Big Tech companies have been surprising investors with massive AI budgets during earnings season, but Sheridan believes this is not just a case of executives competing for bragging rights.
Rather, he sees a physical shortage driving the spending, with memory prices rising and chip costs increasing over the past year or so. Companies like Alphabet and Tesla are spending enormous amounts on chips, memory, land, and data centers to keep up with demand.
The scale of this investment is staggering: Goldman's economists estimate global AI investment will exceed $1 trillion this year alone, including about $581 billion in the United States. Sheridan notes that even leading indicators for AI investment remain near their top ranges since 2022, giving little evidence that the capital cycle is about to roll over.
As a result, each earnings season continues to surprise investors with upward revisions of capital expenditures. Companies are forced to spend aggressively to secure a place in line, as every additional dollar increases both the infrastructure available to capture AI demand and the amount of future profit required to make the buildout worthwhile.