Huo Xing Cai Jing reports that on November 1, two senior strategists at Goldman Sachs offered contrasting views on the outlook for AI-related markets. Tony Pasquariello believes that the third-quarter earnings reports from tech giants reveal that S&P 500 profit growth may have already peaked, with market momentum weakening—making large bets inadvisable at this time. In contrast, London-based strategist Mark Wilson argues that the combined $1.1 trillion in backlog orders from Google Cloud and AWS clearly demonstrates that AI investment returns are materializing, and he maintains a bullish stance. Wilson cites the following data: Google Cloud revenue increased 103% year-over-year, with backlog orders rising 256% to $561 billion; AWS revenue grew 39%, with backlog orders surging 189% to $578 billion, bringing the combined backlog to approximately $1.14 trillion. Wilson contends that the strong growth performance of global cloud providers confirms robust AI demand and is addressing market skepticism about returns on investment. However, Pasquariello argues that the impressive growth in cloud businesses masks weakness in other core operations; while tech giants continue to ramp up capital expenditures, they have yet to substantiate corresponding expansion in profit growth. He notes that signs of peak S&P 500 profit growth are emerging, and the rate of upward revisions to forward EPS estimates has noticeably slowed. The central debate in markets has now shifted from whether AI demand exists to how investment returns will be realized. Despite Alphabet’s $561 billion cloud backlog, the company posted a net free cash flow outflow of $910 million this quarter—well below the market’s expectation of $3.5 billion in net inflow. Another Goldman Sachs strategist, Rich Privorotsky, frames the issue as one of “value capture”: which companies along the AI value chain will actually generate profits, and at what cost of capital? Meanwhile, internal movements within U.S. equities have become markedly divergent: the S&P 500 index excluding AI stocks performed significantly stronger than tech stocks in October. Both strategists agree that market volatility remains unusually high, but they hold differing views on whether the AI-driven rally can be sustained.
Goldman Sachs analysts disagree on AI market outlook amid cloud order growth
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Summary
Goldman Sachs strategists differ on market outlook as cloud orders increase. Tony Pasquariello warned that S&P 500 earnings growth may have peaked, citing weakening momentum. Mark Wilson highlighted $1.1 trillion in backlogged orders from Google Cloud and AWS, with on-chain data showing Google Cloud revenue up 103% and AWS up 39%. Wilson sees returns from AI investments materializing, while Pasquariello questions their sustainability beyond cloud performance.
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