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AI shift is still in ‘very early stages’: Goldman Sachs exec.

AI shift is still in ‘very early stages’: Goldman Sachs exec.
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As artificial intelligence and large language models continue to gain traction, tech companies are investing heavily in this technology. To discuss the outlook for this sector, Goldman Sachs Asset Management Global Head of Client Portfolio Luke Barrs joins Catalysts.

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Barrs highlights the profound impact of AI, stating that it is “transformational” and consistently changes productivity and dynamics across various industries. He notes that some tech companies are pouring significant resources into AI development, investing “every dollar they can find” to maintain their competitive edge and “stay ahead of the pack.” However, as more companies unveil their AI capabilities and cost-effective solutions, Barrs anticipates heightened competition and shifts in market dynamics.

“I think the very short answer is we’re still at the very early stages of this transformation, especially in the public market context,” Barrs told Yahoo Finance.

For more expert insight and the latest market action, click here to watch this full episode of Catalysts.

This post was written by Angel Smith

Video Transcript

Video continues to drive the market.

Rally companies are looking to hop on the A. I train by reallocating capital to a I spend.

Not all of it is created equal.

Yahoo Finance spoke with Alex Carp.

He is P CEO about the challenges facing executives regarding a I expenditures.

Here’s what he had to say.

I think what everybody watching this is familiar with is you have a massive high cycle around large language models, and then when you try to use them in your enterprise, you find out that it’s more like self flagellation and it’s expensive with no output.

So how can investors evaluate a I expenditure and not go into the self flagellation quote that Alex Carp just talked about for?

For more on this, we’ve got Luke bars.

He is global head of my portfolio management for fundamental equity at Goldman Sachs Asset Management.

Luke, great to have you on here.

I you just heard that sound bite.

But from your perspective, what is the correct framework that investors should be utilising to suss out a Capex and what is, you know, really going to lead to growth on the R and D side versus just something buzzy to say on an earnings call.

Yeah, so, firstly, Shauna, thank you so much for having me I. I would say first and foremost, we need to reflect on the fact that a I is transformational.

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It is changing how we operate.

And it is rapidly changing the dynamics in some of the technology hardware businesses that we assess and value as as investors.

Now, what I would say is just thinking through the timing and the sequencing of that, we’re at a point now where your hyper scalar are investing every incremental dollar they can find in staying ahead of the pack as much as they possibly can on the LLM development site.

And that means that if you’re a semiconductor business that’s aligned to server and hypercar capacity extension, you’re in a very sweet spot at this point in time.

Now I think as we go forwards, we should expect competition.

We should see some change in dynamic in that industry.

As we see more companies come to market with capabilities in that space and or as we see the shift from the best in class leading edge nano capacity semiconductors towards something a little bit more cost effective in the ASIC space, actually changing that a little bit.

But right now we’re still very bullish on the space.

We have to be thoughtful around valuations, but we see a lot of opportunity.

Luke, when it comes to, uh, you were recently had had the opportunity joining a small group of investors invited for the day to spend some time, uh, with Microsoft’s senior management team.

I’m curious what your take away from those conversations are just in terms of where we are in this A I cycle a and and how much opportunity it sounds like still lies ahead.

Yeah, and actually just interestingly, our leading investment team on the global and US side have just spent the week on the West Coast meeting with roughly 20 companies, both public, private and actually also on the VC side.

So I think we’ve got some real time intel into what’s happening in that space, and I think the very short answer is we’re still at the very early stages of this transformation, especially in the public market context.

We’re still at the cutting edge of how can you utilise LLM and big data analytical tools in that a I framework, and then how can you apply that into real world solutions?

And so I think at the moment we’re seeing a clear cycle of accelerated earnings in the enabling technologies.

We’re not seeing the evidence of that passing through into the software businesses in the way that we would expect to over the medium to long term.

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And so as we see the long term adoption of A I techniques within those productivity enhancing solutions, I think that’s a further ball case for some of those software businesses, especially the bigger names that we know are at the front edge of that development.





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