Goldman’s AI Skeptic: The Trillion-Dollar Clock Is Ticking Louder

Jim Covello, Goldman Sachs’ head of global equity research, has been questioning the AI spending frenzy since 2024. Two years later, his warning has only sharpened. On a recent Goldman Sachs podcast, Covello noted that companies are losing more money on AI implementations today than they were two years ago. “The hill that has to get climbed is even steeper,” he said, because the spending has only grown.

The economics remain stubbornly lopsided. Enterprise buyers see scant returns. Model developers burn cash. Hyperscalers keep writing big checks. Meanwhile, nearly all the profit has flowed to semiconductor makers like Nvidia. Covello, who covered chip stocks for 16 years, points out that in a normal cycle, suppliers thrive when their customers thrive. Today, customers bleed while suppliers boom. “That can’t go on forever,” he warns.

His advice to investors: favor the hyperscalers over the chipmakers. In two of three likely outcomes, the big cloud operators come out ahead. Only if the current imbalance persists indefinitely do chip stocks keep winning. Few expect that status quo to hold.

Data backs the caution. MIT researchers found 95% of organizations reported zero return on AI pilots. An EY survey showed 99% of companies faced financial losses tied to AI risks, averaging $4.4 million each. Productivity gains that should follow disruption have not appeared. Executives call it an activation gap.

Fear of missing out fuels the spending at every level. Hyperscalers raised capital expenditures even when their stocks lagged. Covello sees that insecurity, not optimism alone, driving the money. And insecurity often signals bubbles.

Political headwinds gather too. Data centers now consume over 4% of national electricity, a share that could triple by 2028. Local communities push back. President Trump brought hyperscalers to the White House in March 2026 to sign a voluntary Ratepayer Protection Pledge—a sign of how fast the issue escalated.

Covello’s central question remains unanswered: When does the short-term become the long-term? “If we’re having the same debate two years from now and we’re still saying, ‘Well, it’s early,’ then we might have a challenge,” he said. The clock is ticking.