Artificial intelligence is on everyone's lips, and that's expected to translate into big bucks for Goldman Sachs, according to CEO David Solomon.
In a conference call on Monday, Solomon said artificial intelligence has been mentioned "in virtually every client conversation" and that there is "big appetite" for the technology among companies and governments.
"There is enormous appetite for perspectives on how certain aspects may play out, including the timeline for commercial impact, shape of potential regulations, impact on jobs, and where value will prove in the ecosystem," Solomon said during a call Monday to announce the company's first-quarter earnings, which surpassed analyst expectations. He said the bank has been "advising clients on these topics and how to think about potential use cases in their operations."
According to Solomon, it suggests a wave of demand for help financing AI acquisitions or new tech, which he predicts will lead to a big boost in business.
"As we look longer-term to the extent that this technology develops in line with expectations, there will be significant demand for AI-related infrastructure and, as a result, financing, which will be a tailwind to our business," he continued.
As Business Insider previously reported, Wall Street's AI predictions are so big that some banks have created new roles to accommodate the sector, while other banks are springing up specifically focused on AI. As of the end of November 2023, machine-learning deals drove a record 27% of tech transactions by value, according to S&P Global Market Intelligence — a figure that's only expected to grow.
"There's a very, very constructive runway of opportunity sets for us with our clients as people reposition their businesses, and we're talking about a level of scale that is candidly — that is candidly unprecedented," Solomon added.
AI's impact on jobs
Solomon also explained how, internally, AI could impact its own workforce. While AI is expected to generate a global windfall — the consulting firm PwC has forecast its contributions to the world economy to reach nearly $16 trillion by 2030 — Goldman itself predicted in a report last March that AI and automation could collectively slash some 300 million full-time jobs in the years ahead.
"We see enormous opportunities for productivity gains and also opportunities for efficiency," Solomon said, describing how the AI revolution could impact Goldman's human capital. "I'd really like the focus to be more on productivity and the ability to scale our smartest people to do more with our clients rather than expecting an efficiency gain that becomes very cost accretive."
AI stands to dramatically impact the lives and careers of financiers, particularly those at the junior levels whose workload generally consists of mundane tasks like generating PowerPoints for client presentations. As BI has previously reported, AI could help in automating some of these mind-numbing chores while also reducing the demand for the thousands of first-year analysts who flock to investment banks year after year. Some firms like Deutsche Bank have been piloting test cases to evaluate the impact AI could have on junior bankers' workflows.
As BI has previously reported. Goldman has been testing AI to streamline its pitch books and automate company comparison tables. A Goldman spokesperson recently told the New York Times that the firm has "no changes" planned for new hires "in the near term."
Goldman isn't the only Wall Street firm plotting a future in an AI-powered world. Across the industry, investment banks are bulking up their AI-focused teams, hiring specialists to help oversee deals in the nascent space, or, in the case of JPMorgan Chase, establishing a designated data and analytics unit.
Monday's earnings results, more broadly, appear to have burnished Solomon's standing at the helm of the bank. Despite facing backlash and criticism from high-ranking internal Goldman executives, the bank smashed analysts' forecasts, pulling in $14.2 billion in net revenue for the first quarter of the year (up 16% from the same quarter last year).
After the bank retreated from its consumer-banking ambitions and pivoted back to its bread-and-butter investment-banking business, it also enjoyed strength in IB in the quarter. Global banking and markets net revenue rose 15% to $9.7 billion, buoyed by a 32% increase in IB fees.
Do you work in the financial-services sector? Get in touch with this reporter. Reed Alexander can be reached at ralexander@bjinnox.com, or SMS/the encrypted app Signal at (561) 247-5758.
