There's no bubble in AI stocks – we are in the early stages of a tech cycle that should see further outperformance, Goldman Sachs says

Goldman Sachs has argued that the rapid rise in AI stocks does not constitute a bubble, and suggests that there is still room for growth. The bank's chief global equity strategist, Peter Oppenheimer, stated that the valuations of these stocks are not as stretched as during the dot-com bubble of the late 1990s, and that these companies have unusually strong balance sheets and returns on investment.

Despite high valuations, the seven biggest US companies in the AI race hold an average price-earnings ratio of 25, compared to a level of 52 for the biggest companies at the peak of the internet bubble. The rally in AI stocks has surprised many, with some likening the boom to the advent of the internet. However, critics argue that some stocks, such as Nvidia, may be overvalued.

Key takeaways:

Goldman Sachs argues that there is no bubble in AI stocks and suggests they have more room to grow.
Peter Oppenheimer, chief global equity strategist in Goldman Sachs Research, believes we are in the early stages of a new technology cycle that will lead to further outperformance.
While tech stock valuations are high, the seven biggest US companies in the AI race collectively hold an average price-earnings (P/E) ratio of 25, compared to a level of 52 for the biggest companies at the peak of the internet bubble.
Nvidia, a prominent AI company, has seen its stock surge by 207% this year, although some critics suggest the stock may be overvalued.

There's no bubble in AI stocks – we are in the early stages of a tech cycle that should see further outperformance, Goldman Sachs says

Key takeaways:

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