Goldman Sachs Sounds Alarm on AI-Driven Cognitive Decline in Banking

A top Goldman Sachs official has sounded a warning about the potential dangers of relying too heavily on artificial intelligence (AI) in banking. Chris Churchman, who leads the bank's digital platform for institutional clients, told CNBC that over-reliance on AI could lead to cognitive atrophy and affect bankers' reasoning skills.

'We outsource our reasoning to these models, and we have cognitive atrophy that stops us being able to reason from first principles ourselves,' Churchman said. He emphasized the importance of junior traders developing their reasoning skills under supervision, rather than relying solely on AI for client pricing requests.

The bank's concerns about AI are reflected in a recent report detailing its impact on labor markets across developed economies. The research found that industries with greater exposure to AI automation have experienced weaker growth in job openings since the second half of 2022. Call centers, software publishing, management consulting, and advertising have seen significant employment declines.

The effects are particularly noticeable in the United States, Germany, and Australia, where employment in these sectors is now below historical trends. Entry-level workers are disproportionately affected, with AI-related headwinds strongest among those at the beginning of their careers. Goldman calculated that a 10% increase in occupational exposure to AI was associated with only a 0.1 percentage point reduction in annual headcount growth, but significantly larger effects for entry-level workers.