Goldman Sachs analyzed the U.S. equity market’s valuation of AI benefits, finding the market is optimistic but not in a bubble. The market may have priced in most long-term AI value, with current valuations exceeding plausible macro benefits.

The PDV of generative AI capital revenue for the U.S. economy is estimated at $8 trillion, with a range of $5-19 trillion. However, market enthusiasm has far surpassed these calculations, with a $19 trillion increase in the value of AI-related companies since ChatGPT’s introduction.

Goldman Sachs warns of risks in overpaying for future profits in the AI sector, citing past market booms. Investors may overestimate aggregate revenue and profit gains and underestimate competition’s impact on long-term profitability. AI’s productivity promise remains strong, but current profits are limited outside hardware.

Goldman Sachs points out that markets should price AI gains ahead of time, but highlights risks of overvaluation. The fallacy of aggregation and extrapolation could lead to excessive valuations and unrealized expectations. AI’s potential productivity boost remains significant, but current profits may not align with market enthusiasm.

Read more at Yahoo Finance: Goldman says the stock market has already priced in the AI boom, with $19 trillion of market value running ahead of actual economic impact so far