dotlah! dotlah!
  • Cities
  • Technology
  • Business
  • Politics
  • Society
  • Science
  • About
Social Links
  • zedreviews.com
  • citi.io
  • aster.cloud
  • liwaiwai.com
  • guzz.co.uk
  • atinatin.com
0 Likes
0 Followers
0 Subscribers
dotlah!
  • Cities
  • Technology
  • Business
  • Politics
  • Society
  • Science
  • About
  • Cities
  • Technology

What The Booms In Electricity And Internet Show About AI

  • October 10, 2023
Total
0
Shares
0
0
0

We would like to thank our generous sponsors for making this article possible.

As investors look to understand how the boom in generative artificial intelligence may play out, lessons from the adoption of electricity and the internet may offer insight into how AI innovation will filter through financial markets, according to Goldman Sachs Research.

While there are limits to these comparisons — the transition to a peace-time economy following World War I and the emerging market crises in the late 1990s, for example, complicate the analysis — those periods of innovation-driven productivity booms from 1919-1929 and 1996-2005 are most comparable to the AI adoption underway now, Goldman Sachs Research Senior Advisor Dominic Wilson and analyst Vickie Chang write in the team’s report. The later episode allows for a fuller comparison due to data availability and change in financial markets. Over that full episode, U.S. equities had healthy if unspectacular gains, while company profits, earnings, and the S&P 500 outpaced nominal GDP by a modest amount.

Both the Federal Reserve’s policy rate and 10-year Treasury yields were clearly lower in 2005 relative to 1996 and tracked the pattern of the cycle in domestic demand. The U.S. dollar was little changed on net. Oil prices fell sharply during the emerging-market crises in 1997-98 but had risen by 2005.

But within that period, there was a large boom and bust in asset markets as Americans embraced the internet, according to Goldman Sachs Research. “During the initial boom, the pattern of market shifts, though not the magnitudes, match what you would broadly expect to see from an (over-)anticipated productivity boom,” Wilson and Chang write. “Equities rose sharply and valuations climbed to extreme levels.”

There was also an economic surge. The share of investment climbed, savings rates fell, and the current account deteriorated. Both the fed funds rate and longer-dated yields fell during the 1997-1998 period as the Asian financial crisis and Russia default hit, but with domestic demand booming, the funds rate rose to a fresh cycle peak in 2000. Longer-dated government bond yields rose, too, but remained below their 1996 levels amid low and stable inflation. The bust threw many of those movements into reverse. “Equities saw large declines, interest rates fell, and the bulk of the U.S. dollar strength reversed,” Wilson and Chang write.

The evidence from the productivity boost in the 1920s as electricity adoption spread is sparser but has some parallel lessons. Equities again had sustained gains alongside the productivity boom. Once again, the equity market rally ended in outsized gains and a very sharp climb in equity valuations, followed by the crash of 1929. The story for Treasury bonds and foreign exchange is harder to map to today’s context given the differences in monetary policy and exchange rate management. Inflation was extremely low over the period. But the Fed’s discount rate again followed the economic and equity cycle, falling in 1924 as the economy weakened before rising steadily and hitting new peaks as the stock bubble accelerated and then burst, Wilson and Chang write.

These episodes suggest that movement in interest rates and currencies was more closely related to the domestic economic cycle than to structural changes in productivity, although the 1990s offer some support for the idea of foreign-exchange appreciation for economies that have outsized gains in productivity. The two prior experiences signal that the biggest impact on asset markets was in equities and equity valuations, and U.S. equities have already been the focus of the potential gains from AI so far.

But historical episodes also indicate there is a risk of a bubble where the market initially overpays for the productivity boom, impacting a broad set of assets. The experience of the 1990s suggests this dynamic could be associated not just with a period of unsustainably high equity prices, but also larger demand booms, greater foreign exchange appreciation, and higher interest rates in the leading AI-adoption countries than would have otherwise been the case.


This article is being provided for educational purposes only. The information contained in this article does not constitute a recommendation from any Goldman Sachs entity to the recipient, and Goldman Sachs is not providing any financial, economic, legal, investment, accounting, or tax advice through this article or to its recipient. Neither Goldman Sachs nor any of its affiliates makes any representation or warranty, express or implied, as to the accuracy or completeness of the statements or any information contained in this article and any liability therefore (including in respect of direct, indirect, or consequential loss or damage) is expressly disclaimed.

Originally published at: Goldman Sachs

Total
0
Shares
Share
Tweet
Share
Share
Related Topics
  • AI
  • Artificial Intelligence
  • Electricity
  • Internet
  • Profit
dotlah.com

Previous Article
  • People

Nobel Peace Prize 2023: Award For Iranian Women’s Rights Protester Highlights Fight Against Declining Democracy Around The World

  • October 8, 2023
View Post
Next Article
  • Cities
  • Technology

New NEOM Progress Film Showcases Rapid Development – Up To October 2023

  • October 11, 2023
View Post
You May Also Like
View Post
  • Cities
  • Technology

Meralco PowerGen’s PacificLight starts up 100 MW fast-response plant in Singapore

  • dotlah.com
  • June 20, 2025
View Post
  • Technology

Apple services deliver powerful features and intelligent updates to users this autumn

  • Dean Marc
  • June 12, 2025
View Post
  • Artificial Intelligence
  • Machine Learning
  • Technology

Apple supercharges its tools and technologies for developers to foster creativity, innovation, and design

  • Dean Marc
  • June 11, 2025
View Post
  • Technology
  • Working Life

It’s time to stop debating whether AI is genuinely intelligent and focus on making it work for society

  • dotlah.com
  • June 8, 2025
View Post
  • Cities

Renewable energy, carbon credits are priority areas of cooperation for Singapore, Philippines: Lawrence Wong

  • dotlah.com
  • June 4, 2025
View Post
  • Cities
  • Politics

Singapore businesses eye more investments in PH, says PM Wong

  • Dean Marc
  • June 4, 2025
oracle-ibm
View Post
  • Artificial Intelligence
  • Technology

IBM and Oracle Expand Partnership to Advance Agentic AI and Hybrid Cloud

  • Dean Marc
  • May 6, 2025
View Post
  • Software
  • Technology

Canonical Releases Ubuntu 25.04 Plucky Puffin

  • Dean Marc
  • April 17, 2025


Trending
  • 1
    • People
    • World Events
    An Indian Company Is Gearing Up To Make Millions Of Doses Of A $3 Covid-19 Vaccine
    • August 13, 2020
  • 2
    • Cities
    • Society
    NEA Issues Guidelines For Cleaning And Sanitation Of Premises
    • January 30, 2020
  • 3
    • Cities
    Traffic Congestion Reconsidered
    • November 7, 2019
  • 4
    • Technology
    NUS Researchers Discovered A New Personalised Tool To Detect Cancer Using Big Data Analytics
    • January 14, 2020
  • black-history-month-banner 5
    • People
    Black History Month: What Is It And Why Do We Need It?
    • February 8, 2021
  • 6
    • Technology
    Why Robots Are A Game-Changer During And Post-Pandemic
    • November 14, 2021
  • 7
    • Technology
    How To: Configure Python Virtual Environment In Ubuntu
    • April 6, 2019
  • 8
    • Lah!
    The Return Of A Legend: Raffles Singapore Officially Reopens
    • August 2, 2019
  • 9
    • Lah!
    DBS/POSB Increases Number Of New Notes ATMs And Online Reservation Slots This Chinese New Year (CNY)
    • January 13, 2021
  • 10
    • Lah!
    • Technology
    Autonomous Vehicle Testbed To Be Expanded To Western Singapore – Continued Emphasis On Public Safety
    • October 24, 2019
  • 11
    • Lah!
    Changi Airport Begins Terminal 2 Expansion Works To Increase Capacity And Enhance Passenger Experience
    • January 17, 2020
  • 12
    • Lah!
    • Technology
    Anti-Money Laundering Prototype Using Artificial Intelligence And Machine Learning Launched
    • August 10, 2021
Trending
  • Camping 1
    The Summer Adventures : Camping Essentials
    • June 28, 2025
  • 2
    Meralco PowerGen’s PacificLight starts up 100 MW fast-response plant in Singapore
    • June 20, 2025
  • 3
    A Father’s Day Gift for Every Pop and Papa
    • June 14, 2025
  • 4
    Apple services deliver powerful features and intelligent updates to users this autumn
    • June 12, 2025
  • 5
    Apple supercharges its tools and technologies for developers to foster creativity, innovation, and design
    • June 11, 2025
  • 6
    It’s time to stop debating whether AI is genuinely intelligent and focus on making it work for society
    • June 8, 2025
  • 7
    PBBM asks Singapore to invest more in PH renewable energy projects
    • June 6, 2025
  • 8
    Singapore PM Wong arrives in Malacañang
    • June 4, 2025
  • 9
    Renewable energy, carbon credits are priority areas of cooperation for Singapore, Philippines: Lawrence Wong
    • June 4, 2025
  • 10
    Singapore businesses eye more investments in PH, says PM Wong
    • June 4, 2025
Social Links
dotlah! dotlah!
  • Cities
  • Technology
  • Business
  • Politics
  • Society
  • Science
  • About
Connecting Dots Across Asia's Tech and Urban Landscape

Input your search keywords and press Enter.