Goldman Sachs Links Tech Earnings Risk to Capital Competition
Goldman Sachs chief strategist Peter Oppenheimer now quantifies the risk of an AI-driven earnings bubble, citing record capital spending and a sharp rise in the cost of debt.
Goldman Sachs chief global equity strategist Peter Oppenheimer has moved from warning about a potential tech earnings bubble to providing specific data backing that thesis. In a report titled “Competition for Capital,” Oppenheimer argues that artificial intelligence infrastructure spending and government borrowing are directly competing for a finite pool of capital. This collision is driving up the global cost of capital, a mechanism he previously only implied in an early August note.
The new analysis hardens the earlier view that technology stocks may face an earnings problem rather than a valuation issue. Oppenheimer ties the risk to specific stress tests and near-term triggers visible in bond market turbulence. While he does not declare a bubble definitively, the report links the potential downturn to capex-to-cash-flow data, record credit issuance, and a downgraded near-term outlook for equities.
Record capital spending fuels debt issuance
Capital spending among AA-rated technology issuers grew 65% year-over-year in the second quarter. This marks the tenth consecutive quarter where aggregate AA capex growth exceeded 35%. The surge in spending is driving a corresponding increase in financing needs, with U.S. convertible bond issuance reaching $135 billion year-to-date.
AI-related borrowers account for 44% of total convertible bond volume. Goldman’s credit team has raised its full-year U.S. investment-grade issuance forecast by $200 billion to a record $2.3 trillion. AI-related issuers now represent a quarter of this total supply, indicating a heavy reliance on debt markets to fund infrastructure expansion.
Cost of capital rises with competition
Oppenheimer identifies a direct competition for capital between private companies funding AI data centers and governments borrowing for infrastructure and defense. This dynamic pushes up the cost of capital as both sectors seek to raise debt and equity. The result is a higher required return on investment, which pressures the earnings growth that has powered recent market performance.
The previous August note cited anecdotal evidence, such as volatile stock reactions to earnings reports and the outperformance of the equal-weighted S&P 500. The current report formalizes this by linking these market behaviors to the structural increase in financing costs. Investors are increasingly suspicious of the concentration of earnings growth in a few large technology firms.
Apollo echoes the savings shortage view
Torsten Slok, chief economist at Apollo Global Management, provided a similar diagnosis five days before the Goldman report was published. Slok argued that the era of a savings glut has ended, replaced by a savings shortage. He noted that there are now more investment projects than available capital, forcing capital to compete by demanding higher yields.
Slok pointed to secondary bond markets as evidence, noting that spreads on hyperscalers’ longest-dated bonds have widened. Most paper issued in 2026 now trades wider than its initial pricing. This convergence of views from major financial institutions suggests a broad consensus that the low-rate environment is ending due to structural shifts in capital allocation.
