⚡ Goldman Sachs insiders diverge on AI rally: One warns profit growth has peaked, another cites $1.1 trillion in backlog as proof of ROI On November 1, two senior Goldman Sachs strategists offered sharply contrasting views on the outlook for the AI rally. Tony Pasquariello argued that the third-quarter earnings reports from tech giants revealed that S&P 500 profit growth may have already peaked, with market momentum weakening—making large bets premature. In contrast, London-based strategist Mark Wilson contended that the combined $1.1 trillion backlog in orders for Google Cloud and AWS clearly demonstrates that AI investments are delivering returns, maintaining a bullish stance. Wilson cited data showing Google Cloud revenue up 103% year-over-year, with backlog increasing 256% to $561 billion; AWS revenue rose 39%, with backlog up 189% to $578 billion—combining for approximately $1.14 trillion in backlog. Wilson argued that the strong growth of global cloud providers confirms enduring AI demand and is addressing skepticism about investment returns. However, Pasquariello countered that robust cloud growth masks weakness in other core businesses: while tech giants continue to ramp up capital expenditures, they have yet to substantiate corresponding expansion in profit margins. He noted that signs of peak S&P 500 profit growth are emerging, and upward revisions to forward EPS estimates have noticeably slowed. The central market debate has now shifted from whether AI demand exists to how its returns will be realized. Despite Alphabet’s $561 billion cloud backlog, the company posted a $910 million net outflow in free cash flow this quarter—well below the $3.5 billion net inflow expected by markets. Another Goldman strategist, Rich Privorotsky, framed 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 U.S. equity performance has diverged sharply: the S&P 500 excluding AI stocks significantly outperformed tech stocks in October. Both strategists agree market volatility remains elevated, but they hold differing views on whether the AI rally can be sustained.