Goldman Sachs' Oppenheimer Warns of Earnings Bubble in Tech Stocks

Goldman Sachs' top strategist, Peter Oppenheimer, has issued a revised warning about an earnings bubble in technology stocks. In his latest report, titled 'Competition for Capital', he ties the risk of an AI-driven earnings bubble to specific historical stress tests and near-term triggers.

The report comes six weeks after Oppenheimer first raised the possibility of an earnings bubble, citing wild swings in quarterly earnings and a growing concern among investors about the concentration of earnings growth. He argued that the risk is linked to 'more government debt, increased issuance, and persistent inflation' pushing up the cost of capital.

Oppenheimer now claims that AI infrastructure spending and government borrowing are directly competing for the same pool of capital, with private companies raising debt and equity to fund data centers at the same time governments borrow more for infrastructure, energy security, and defense. This collision drives up the global cost of capital, according to Oppenheimer.

He backs his argument with numbers: Capital spending among AA-rated technology issuers grew 65% year-over-year in the second quarter, while U.S. convertible bond issuance has reached $135 billion year-to-date, with AI-related borrowers responsible for 44% of total volume.