Fed Hike May Not Stem AI Investment Spending, Goldman Sachs Warns

Goldman Sachs analysts have made a point that a potential Federal Reserve interest rate hike may not necessarily put an end to AI investment spending. According to Jonathan Shugar, the market was pricing in around an 84% chance of a hike within the next week and 50 basis points of tightening by the end of the year. However, his main concern is the long-term end of the yield curve.

Shugar believes that failing to raise interest rates could leave policymakers with less control over longer-dated rates. He specifically mentioned Alphabet-A's Google Cloud, Microsoft's Azure, Amazon's AWS, and Oracle's OCI cloud infrastructure as key areas where AI investment spending is taking place.

The analysts pointed out that investors should be paying attention to capex guidance rather than just model releases. A tangible cut in hyperscaler or frontier-AI-lab capex plans, GPU orders, or planned data-centre capacity would be a more meaningful bearish confirmation of weakening AI investment spending.