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Goldman Sachs Investment Chief: How to WIN the AI trade in 2027 — Transcript

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0:00Alexandra, you wrote recently we're
0:01entering the fourth stage of the AI
0:03trade. I don't really understand what
0:05that means. Can you help me understand
0:06this?
0:07>> Yeah, of course. Um there's obviously a
0:09lot of headlines right now as it relates
0:12to AI.
0:13And when we talk about the stages of AI,
0:16what we're really referencing is that
0:18we're in the debt-funded stage of the AI
0:20cycle.
0:22And that is putting a lot of pressure on
0:24the market because
0:27investors are focused on how much
0:30current supply is coming to the
0:31investment grade and high-yield market,
0:34not only now, but also on the forward.
0:37And this is really important in the
0:38context of having a higher interest rate
0:41from the Federal Reserve in the front
0:43end of the curve because that's
0:45technically your hurdle rate.
0:47And so are you being compensated enough
0:49for the risk that you're taking on in
0:51credit markets,
0:52which obviously you don't participate in
0:55the forward growth of a company because
0:57it's a capped return in credit?
1:00Uh so you have to be really careful
1:01about what you're underwriting. So you
1:03have to pay attention to the cash flows
1:05of the security
1:07and the counterparties that you're
1:08exposed to. So last week there was a lot
1:11of headlines, or maybe not last week,
1:12but a few weeks ago headlines on some of
1:15the neo cloud businesses.
1:17And some of the questions are, do you
1:19have counterparty risk? Is there forward
1:21default risk? Uh and that in our minds
1:24is actually less of an AI trade
1:27question, but actually more of a
1:28financing trade because they are
1:31currently funding themselves at a higher
1:33rate than perhaps that they've written
1:35their forward contracts on.
1:37>> A lot of those stocks are down I think
1:38like 35, 40% over the last few weeks.
1:41That has been a pretty scary corner of
1:43the market I'd say.
1:45Can you explain what you see as the
1:47first three stages before we keep going
1:49on the financing? The first three stages
1:51of the AI trade, if this one's the debt
1:52financing one.
1:53>> Mhm.
1:54Yeah, so whether it was, you know, being
1:56funded by chips at or the balance sheet,
1:59now it's you no longer have the cash
2:02flow that you're spending your operating
2:03cash flow, you're actually going to the
2:05market and trying to fundraise there.
2:09>> Okay.
2:10Um,
2:10is there anything that stands out to you
2:12as a big red flag or a concern about
2:15some of the debt financing we're seeing
2:18with the hyperscalers, with some of
2:19these other AI businesses?
2:21>> So, for the most part, these are really
2:22high-quality credits.
2:24Uh, that being said, you know,
2:27there are you know, issuers that are not
2:29necessarily the same in credit quality
2:32as others. Uh, their balance sheets
2:35could be more stressed with higher
2:37levels of interest rates. Um, there
2:39could be issues where you're
2:42underwriting someone who might have some
2:44bottleneck issues in terms of energy
2:47constraint.
2:48Um,
2:49but for the most part, you know, the big
2:52Mag 7 names, the big hyperscalers are
2:55very high-quality credits in the
2:57marketplace. It's a little bit in my
2:59mind of indigestion.
3:01There's a lot of supply coming.
3:03>> Can you explain that a bit more? What
3:04what do you mean by indigestion?
3:06>> So, you know, the credit markets have to
3:08absorb all of this supply with all the
3:11the marginal hyperscalers saying, "Hey,
3:13I need to go raise X billions of
3:14dollars." We have another very large
3:16name coming to market this week.
3:19People have to be able to lend to that.
3:21And so, if you're the first person
3:24coming to market, perhaps you'll do okay
3:26because there's no been nobody before
3:28you. You get to the middle part or the
3:30middle segment of issuance, everyone's
3:32like, "Okay, I've got I've got a lot of
3:34AI debt um, of all different varieties
3:37across the capital structure,
3:39and I know more is coming."
3:41And that's why you start to get a little
3:43bit of the indigestion. Okay, well, if
3:44more supply is coming, then I should
3:46keep continuing pricing a higher and
3:48higher coupon on the go forward.
3:51>> What do you make of the conversation
3:53around the financing being a sign of a
3:56bubble or the financing
3:59drawing comparisons to how things were
4:02at the height of the dot-com bubble.
4:03>> Yeah, so, you know, I I've been pretty
4:06vocal about this. I think that the wrong
4:07question is being asked. Um, you know,
4:10focusing on whether or not this is a
4:12bubble is just people's anxiety as it
4:14relates to a new technology, a lot of
4:17speed, and a lot of issuance at the same
4:19time.
4:20Um
4:22you know, the real question is is there
4:24demand?
4:25And effectively, if you look at 2027,
4:27there's like a sold out sign on top of
4:29AI, right? So, there's a lot of demand
4:32for compute, and actually there's a
4:34little bit of a supply constraint. Um
4:37and
4:39you know, every every you know, marginal
4:41thing that you could look at to see if
4:43there's, you know, an issue as it
4:45relates to demand. So, whether or not
4:46the GPUs
4:48um are keeping their, you know, their
4:50value, are they starting to depreciate
4:52faster? And if anything, their lives are
4:53extending.
4:55Uh so, you know, every way we look at
4:57this, the fundamentals are pretty
4:58robust. Now, here's the thing about AI.
5:03It's a confidence game, too. There's a
5:05lot of leverage, and if you start to see
5:07confidence come into play, then very
5:10quickly you could have sort of a
5:11self-fulfilling prophecy on there's a
5:14lot of people who own the same debt.
5:16There's a lot of leverage in the market,
5:18confidence wavers, and then you can go
5:20into a little bit of a spiral with
5:22fundamentals. We don't think that that's
5:24going to happen now. We did expect some
5:26levels of indigestion just around
5:28midterms and given how high valuations
5:30had gotten and some of the pressure
5:31you've seen on interest rates given
5:33what's been happening in the Middle East
5:35and with the Fed. Uh so, we took it as
5:37an opportunity to selectively
5:40you know, put on some hedges in the
5:42portfolio, but our longer-term outlook
5:45is still quite positive on US equities.
5:47>> So you mentioned the GPUs and I think
5:50one of the concerns I'm hearing more and
5:52more about is that these companies are
5:54borrowing
5:55a gazillion dollars against technology
5:57that could essentially become obsolete
5:59much faster than a lot of investors or
6:02or businesses assume. Can you talk about
6:05your thoughts on that and whether any of
6:07that is worrying you right now?
6:10>> I mean there's always some element of
6:12being worried about that because there's
6:14an a an unknown quantity, but that being
6:17said, all of the different ways that
6:19we're using the technology or we see our
6:21clients using it show that there's
6:23tremendous power there. Um so it's
6:26you know, some people want to throw the
6:28baby out with the bathwater. We prefer
6:29to spend our time picking the winners
6:31and losers that we think are going to
6:32exist on the forward.
6:34>> How would you go through picking winners
6:36and losers? Like if you had to come up
6:38with a checklist of parameters you're
6:40looking for to make investment ideas on
6:42this trade, how would you start that?
6:45>> So you want to make sure it depends on
6:47again on the capital structure how
6:48you're investing. So are you investing
6:50in equities or you investing in debt or
6:52securitized debt?
6:55We are very thoughtful around, you know,
6:58is this a good balance sheet and
7:00management team?
7:02Um are they, you know, funding in they
7:04have multiple
7:06venues for funding or do they rely on
7:08one source?
7:09Does the business have concentrated
7:12counterparties or multiple
7:13counterparties?
7:15Uh are they embedding themselves in the
7:18entirety of the ecosystem or just a
7:19small segment of the ecosystem?
7:22That's why we're when people are talking
7:24about the AI bubble or the AI trade,
7:26it's about so many things. It's not just
7:29one
7:31factor anymore. Uh and we think you have
7:33to go beyond that, really push the
7:34envelope on understanding what you're
7:36investing in.
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8:37So, just to clarify, if a company is
8:38embedding itself in a bunch of different
8:41parts of the AI ecosystem, do you see
8:43that as a good thing or a bad thing?
8:44>> Well, it it depends. I mean, these are
8:46large generalized questions.
8:48Um but in most cases, it's helpful if
8:51you don't aren't just reliant on one
8:53small segment of the market or one
8:55counterparty. So, if you're, you know,
8:57finding your way across different
8:59business models, then that's obviously a
9:01much broader customer base than just one
9:03area. Equally, are you well diversified
9:06globally? Um you know, you could say
9:09that there's legislation risk in some
9:11states. There's
9:13um some states that are or more focused
9:15on being business-friendly than others.
9:17And so, it's just a whole part of, you
9:18know, how you underwrite the credit, how
9:20you underwrite the narrative in the
9:21equity side.
9:23>> Are there [snorts] any um early warning
9:25signs you are seeing coming out of
9:27credit markets that maybe suggest
9:30investors are becoming less willing to
9:31finance
9:33some of this AI build-out?
9:34>> Yeah, I mean, So can look at CDS or
9:36credit default swaps on some of these
9:37names. They're pretty distressed levels.
9:40Um you know, a lot of people are
9:42pointing towards high yield. The triple
9:43C market is trading much wider than it
9:46was just even a few months ago, but some
9:49of those names have nothing to do with
9:51AI. Uh and they were you know, already
9:54showing signs of stress prior to this.
9:56This more of a you know, individual
9:57fundamental story.
9:59Um
10:00But yeah, I think holistically the
10:02market is just pricing a bit wider.
10:04But I would say that the credit are
10:06effectively separating from being one
10:09type of market into multiple segments of
10:11a market. I'll tell you what I mean by
10:13that.
10:14There's the you know, the financials,
10:16the old blue chip names.
10:18Those those price and trade differently.
10:20Then you have all this AI debt coming to
10:22the market. And then you have a lot of
10:24the you know, liability management
10:26exercises or default type names that are
10:29being engineered rather than um being
10:31handled on recovery.
10:34>> Okay. So Alexandra, I have a a note here
10:38which is from your notes. I'm going to
10:39read this back to you in your words.
10:42The best hedge against AI is more AI.
10:45Can you put that in context for me and
10:46explain what you meant when you wrote
10:48that?
10:48>> Yes. So
10:50context is important.
10:52As it relates to the hedge on AI being
10:55more AI, some of these names that are
10:58going to IPO and come to the market,
11:01they are what is going to disrupt a lot
11:03of the other businesses.
11:05So it depends if you're looking at AI as
11:08a {quote} risk in terms of a bubble as
11:11you mentioned or AI as a disrupting
11:14factor.
11:16And so if you think about it being a
11:17disrupting factor, you want to own the
11:19big disruptors.
11:21Those are the ones coming to the market.
11:24>> That would be something like a open AI
11:26or Anthropic. Am I
11:28>> For example.
11:28>> For example. Got it. Okay.
11:31Um
11:32if I am sitting here as a individual
11:35investor,
11:36how should I be thinking about picking
11:39my opportunities for 2027 if I'm
11:42thinking specifically about equity
11:43markets?
11:46>> So, we're we're broadly optimistic on
11:49the market. A couple of things though.
11:51Um
11:52in aggregate, the market is healthy.
11:55It's narrow underneath. A lot of the
11:57story is coming from AI and AI capex
12:00spend.
12:01Anything related to the macro or higher
12:05interest rates is under pressure. That's
12:08the consumer cyclicals, you know, all
12:10that the housing market, things that you
12:12would expect.
12:14There are some segments of the market
12:16though that are beneficiaries of AI
12:18trading pretty cheaply relative, but you
12:21also have a higher inflation hedge in
12:25them. Uh and you also have the potential
12:28for them to be very large beneficiaries
12:30of AI, and they've been big enough to
12:33spend aggressively
12:36so that they can be large beneficiaries.
12:39Think of the pharmas. Think of
12:40utilities, those types of sectors. Um
12:44so, those are some of the spaces on in
12:452027 that we're interested and and
12:48looking at more deeply.
12:50>> So, you you travel a lot, you speak to
12:51clients.
12:53What is the general vibe when you're
12:56meeting people that you work with at
12:58Goldman? Are they more optimistic about
13:00AI? Are they nervous? Do they think the
13:03Terminator's coming? Like, what what's
13:04your read on what the Goldman client
13:07base is feeling right now?
13:08>> I think people are actually quite
13:10rational.
13:11They're very optimistic about the
13:13technology and the capabilities of the
13:15technology.
13:17There are some risks. Every day in the
13:18paper, there's something new being
13:19talked about. I think one of the biggest
13:21ones that we paid attention to are some
13:24of the cybersecurity risks. Um
13:27but that being said, I think globally
13:30people are optimistic. They just want to
13:31make sure that they own it, they own it
13:33in the right place,
13:35and that they don't have the same
13:36exposure six different parts of their
13:38portfolio without really understanding
13:40that.
13:42>> So, I think one of the big stats people
13:44point to is that the 10 biggest stocks
13:46are 40% of the S&P 500 now, and they're
13:50pretty much all AI names. So, everyone's
13:52retirement account, if you just bought
13:54the index, you're very overweight AI. Is
13:57that something you see as
14:00a risk people should be positioning
14:01around?
14:02>> I I think anytime there's a lot of
14:03concentration, you have to be thoughtful
14:05about it.
14:06That being said, it's actually been a
14:08huge benefit to those portfolios as of
14:10late, right? Because you have multiple
14:12stocks that are actually in technical
14:14recession right now, down 20% plus from
14:16their highs, but the index is still
14:19holding up pretty well, and that's
14:20because there's a few big names holding
14:23up the index. So, it that equally that
14:25dynamic could other way. So, you just
14:28have to understand and know how the
14:30index is constructed, and you know, what
14:33you're you're exposed to as a as a
14:35consequence of that. But, people want to
14:37look at it in negative light, it's
14:38actually been quite positive for them
14:39this year.
14:40>> It's worked pretty well the last few
14:42years. I mean, being overweight AI,
14:45overweight technology has been a
14:47massively winning bet.
14:49What do you make of the idea, and this
14:52is one that I've talked to a lot of
14:53people about, it's pretty divisive on as
14:56far as who who falls on what side of
14:57this?
14:59AI can be the best technology we've ever
15:01seen, but it still ends up as a bad
15:03investment in your portfolio.
15:05What do you think?
15:06>> I mean, that is possible. That happens
15:08with lots of different things.
15:10Uh again, it goes back to you have to
15:12understand the company that you're
15:13investing in.
15:15You have to understand what part of the
15:16company that you're investing in,
15:18meaning what are you Do you own it in
15:19equity? Do you own it in debt?
15:21What their exposures are to the AI cycle
15:25or just the cycle in general, right?
15:27There's AI and then there's also just
15:28the broader cycle.
15:30Um and so
15:32it's possible. Yeah, but I think you
15:35just have to you have to know what
15:36you're investing in. This is no longer
15:37that beta market of like everything goes
15:40up to the right, just you know,
15:42this is great. The easy money has been
15:44made.
15:46It's it's like really time to pay
15:47attention as an investor.
15:50>> So, isn't other way to say that this is
15:52becoming increasingly a stock picker's
15:54market?
15:55>> Uh it that's one way you can say it,
15:57yeah. Um but it's also about you know,
16:01again to your point on do I just buy the
16:03index? Do I buy active management? Which
16:05parts of the market are worth paying for
16:07active management? Uh so yes, I mean I
16:10would say that and the market has shown
16:12you that this year.
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16:27it. Now let's get back to the episode.
16:30If we zoom out a bit beyond AI
16:34and you look at the macro backdrop and
16:36the economy, my read on it is that there
16:39really isn't much happening outside of
16:41AI as far as
16:43uh let's say things propping up the
16:45economy. It's almost entirely AI and
16:48some of the CapEx commitments over the
16:49next couple years.
16:51Do you agree with my assessment? One, uh
16:53but two,
16:54where else are you seeing strength in
16:56the macro and economic backdrop?
16:59>> So, I'd say it's it's been AI and
17:01fiscal, right? There's been a huge
17:03fiscal thrust to the market.
17:05Uh outside of the US, there's equally
17:08opportunity.
17:10Uh I would say on the cyclical side,
17:12we've been focused on some of the
17:14financials or banks within Europe.
17:17Uh even within the US that's, you know,
17:19meaningful beneficiary of, yes, the AI
17:22trade, but just broader,
17:24um, business activity and sentiment. So,
17:27there's more than, you know, just one
17:30trade in the market. You just have to be
17:32able to to find it and then and locate
17:34which market you want to to participate
17:36in.
17:37>> European financials, can you tell me
17:39more about that?
17:40>> Yeah, so, you know, when you look at
17:42Europe, by the way, Europe has actually
17:44been quite resilient. Um, all else
17:47equal, you'd say, "Okay, oil's at $100,
17:50they're raising rates, you know,
17:52currently seeing some fiscal pressure,
17:54but Europe has continued to do
17:57reasonably well,
17:59um,
17:59and there's segments of that market
18:02which were trading
18:03at decent multiples that are, you know,
18:06beneficiaries of the rate regime, and,
18:09um, you know, so we we try to find our
18:11value patches not just in the US, but
18:13all over the world.
18:15>> So, I I know one of the other, uh,
18:18opportunities you're looking at is
18:19emerging markets. Can you tell me about
18:21that?
18:22>> Obviously, emerging markets are closely
18:23linked to the AI trade, um, but they're
18:25also linked to commodities and the
18:28resource constraint. So, whether you're
18:30in LatAm or you're in, you know, Asia,
18:35there's plenty of different
18:36opportunities across the AI ecosystem or
18:38broader the commodity landscape that we
18:40think you can participate in. Some of
18:43it, as we've seen in the headlines,
18:44there's been a lot of, you know,
18:46exuberance, new money buyers, leverage
18:49in a marketplace. So, you've seen some
18:51more wild swings up and down, but on
18:53those down days, there's plenty of
18:55opportunities to start putting your toes
18:57into the market and participating.
19:00>> So, Korea has been in the headlines a
19:02lot last few years, um,
19:05and I I've said this a bunch publicly,
19:08uh, I own this ETF called EWY, South
19:11Korea ETF, mostly SK Hynix and Samsung.
19:15It's gotten obliterated last month or
19:17so. That's not been fun, but it's up a
19:19lot still over the last couple of years,
19:21which is great news. Do you still see
19:23Korea as an opportunity for, let's say,
19:25the year ahead?
19:26>> I do.
19:27I do. And again, when you see those, I
19:30guess you referred to it as obliterated,
19:33those days, those weeks, you know, they
19:35do give you an opportunity to come in in
19:37a more as a more rational buyer.
19:40Uh but you do have to pay attention to,
19:42as we have everywhere, the market
19:44structure is changing, the composition
19:46of the buyers in the markets are
19:47changing. And like whenever there's
19:49leverage and newer type of buyers,
19:51you're going to see swings like that.
19:53>> I mean, I saw so many headlines about
19:56South Korean investors selling their
19:59possessions to buy more stocks over the
20:01last few months.
20:02That seems like a top signal if there
20:04ever would be one. Um what is it
20:06specifically about South Korea you think
20:09looks compelling? And and what is also
20:11market structure changing? What does
20:12that mean?
20:13>> Uh so, I'll answer your last question
20:15first. The market structure changing is
20:17what I was referring to earlier, which
20:18is when you have leverage and you have,
20:20you know, newer retail buyers, to your
20:22point, people who, you know, don't have
20:24the institutional knowledge or the same
20:26risk framework. That that's something
20:29that you have to be careful with. Um not
20:31always, but it's something that, you
20:34know, means that the market can move
20:36quickly. Um and sentiment can change
20:39rapidly. The other element is, yeah, I
20:42think that there's still lots of
20:43opportunity. They're a very important
20:45part of the AI cycle. So, if you are a
20:47believer in the AI cycle, which we are,
20:50then, um you know, it's it's a good
20:52market to be part of.
20:54>> Okay, I I want to ask you about Japan,
20:57cuz this was also something you noted.
20:59This is still something you see as an
21:01opportunity, right?
21:02>> Yeah, I mean, if you if you ask people
21:05in the investment world, like where have
21:07you been in the last 6 months? Almost
21:10every person will tell you they've been
21:11on a trip to Japan.
21:13There is so much opportunity, so much
21:15happening on the ground. I mean, as a
21:18markets person, just given what's
21:20happened with rates there and the
21:21currency, obviously, there's a lot of
21:23volume.
21:25But even on the private equity side,
21:28corporations [clears throat] focused on
21:29their balance sheet and you know,
21:30releasing some of the potential off
21:32their balance sheet.
21:34It's structurally actually a market that
21:37has cyclicality to it, but it's a
21:39different version of cyclicality than
21:41just the AI trade, if you will. And so,
21:43it brings a lot of diversification to
21:46the portfolio, as well. Um so, yeah,
21:48there's a lot There's a lot of
21:49opportunity there.
21:51>> And is this something as simple,
21:53you know, for a guy like myself, not
21:55really an institutional guy, can I just
21:57go buy a Japanese index fund? Is that
21:59like the easiest way and maybe a logical
22:02way to play it?
22:02>> You can. You can buy an index fund in
22:04Japan.
22:05>> Hm, okay. Um and if I'm not mistaken,
22:08Japan is not super exposed to AI, right?
22:11>> I mean, it is, but a a large part of the
22:14cyclicality of the market, they've got
22:15autos and financials, and so, you know,
22:18if you're looking for an index that has
22:20a bit more diversification, then it's a
22:22market that you can go into.
22:24>> That makes sense. Um if we think about
22:27opportunities outside of AI, what stands
22:29out to you? Something non-AI related and
22:32that we can still get exposure to as US
22:35investors.
22:36>> So, I I'll just come back to the couple
22:38of sectors that I mentioned earlier. I
22:39think there are, you know, if you pull
22:42up the roster of sectors this year and
22:44how they've performed, there's a couple
22:46that are, you know, basically flatlined
22:48or not done well because of either
22:50what's happened with rates,
22:52um
22:53or because, you know, there was a
22:55regulatory overhang. Those have kind of
22:58come and gone. It's been priced into the
22:59market, and we think there's some some
23:01potential on the forward with those.
23:03>> Which would be
23:04>> Those would be the utilities in the
23:05pharma space.
23:07>> Okay. Um and is that What's the thesis
23:10driving those two higher, you think?
23:12>> Well, I On the utility side, it's I
23:15mean, the the number one constraint to
23:17AI is
23:18energy.
23:19And so, if you want to play the AI
23:21ecosystem in a regulated way in some
23:24cases,
23:25um
23:26that's a it's a good sector to to take a
23:28look at. On the pharma side, I mean,
23:31there's a huge demographic tailwind to
23:33pharma.
23:34Uh and again, I think we're in the the
23:37the time of the market where like winner
23:39takes all, bigger is better. These large
23:42pharma names are very large and have
23:44been able to start to embed AI into
23:47their workflows. You'll start to see
23:48those those synergies accelerate.
23:51>> So, one of the stocks that I personally
23:53like is Eli Lilly.
23:56I think they have an amazing few years
23:58ahead based on earnings growth, but part
24:01of that is I think the demographic
24:03tailwind is pretty incredible. If If
24:05everyone's getting older and also all
24:07the young people are increasingly
24:08wanting to get fitter through GLP-1s or
24:11any of these other types of drugs, that
24:13seems like a big winner, and I think the
24:14thesis probably applies to the whole
24:16sector, like healthcare, pharma, and
24:18biotech to a certain extent. I think is
24:20a massive AI beneficiary because of all
24:22the research, and if you can speed up
24:25drug development processes, that is
24:27super interesting to me. That's a space
24:28I'm watching a lot.
24:31Okay, there are a couple regional
24:33questions I have to follow up with you.
24:35Um
24:35>> Can I just I I just want to finish on
24:37that?
24:37>> it.
24:37>> I would just say that that your thesis
24:39is like wrapped around the topic of
24:41longevity.
24:43You know, that when you think about how
24:45much wealth has been created over the
24:48last couple of years,
24:51everybody I know, and I'm sure everybody
24:52you know, is very focused on how to stay
24:55healthy, how to live longer. We call
24:58that basically the longevity trade. And
25:01to your point, that's you know, if I'm
25:03just re- re-framing what you're focused
25:04on in your thesis, that's how I would I
25:06would I would say it is.
25:08>> Is the longevity trade something Goldman
25:10is focused on?
25:11>> I'd say like from a thematics, yes,
25:13because everything about longevity, it
25:16changes some of your life cycle
25:18business, it changes how you, you know,
25:20discount liabilities over time. So, you
25:22have to be very thoughtful around if
25:24people are going to live much longer,
25:26it's going to change some of your
25:27assessments for how they should be
25:29saving. So, yes, I think it's part of
25:33everything that we're talking about is
25:35how you think about longevity both in
25:37the individual sectors, but also what
25:39does this mean for how people are going
25:40to save and their needs to save over
25:42time.
25:44>> What do you think fits into the
25:46longevity thesis? And maybe there's
25:48nothing else, but besides pharma,
25:51healthcare, biotech, what else would you
25:53loop into the longevity idea?
25:55>> I mean, on the private side, life
25:57sciences,
25:59uh you know, how people are, you know,
26:01trying to invest to find, you know,
26:04unique creative ways to
26:06cure cancer, you know, deal with
26:09different ailments. So, it yes, it's
26:11like
26:12private version of some of the public
26:13stuff you've talked about.
26:15>> Okay, yeah, I I like that a lot. Um
26:19I have another thing that I've been
26:21writing about a lot is how GLP-1s are as
26:24big of a technology as AI.
26:27And I think if you
26:28just take the zoomed out version of what
26:30you're saying, longevity plus AI,
26:33probably the two biggest investment
26:34themes for the next decade, maybe.
26:37>> Yeah, they're two they're right up there
26:39with some of the most important themes
26:40of the next decade.
26:42>> Okay, so tell me about Indonesia. This
26:45was also in your notes. Is this
26:47something you still see as an
26:48opportunity? One, and two, how would
26:51someone get exposure to Indonesia?
26:53>> So, I just want to reframe that cuz
26:55Okay. This is where context matters. Um
26:57this was because there was a pretty
26:59material drawdown in Indonesia. So,
27:01someone had asked me, you know, did I
27:03did I think that there were going to be
27:04a recovery? This was actually as a
27:06result of an index inclusion or
27:08exclusion, and this all go back to the
27:10question that you had asked me earlier
27:12on, like index concentration, index
27:14matters. All of these rules matter
27:15because people have been investing
27:18passively
27:20for quite some time now. And so, if
27:21there's a big change on an index, then
27:24that leads to a certain amount of
27:25dollars having to be a seller of that.
27:28And so, that was what that question was
27:29about.
27:30>> Okay.
27:31Um
27:32is that a country that you would just
27:36tie into the emerging markets theme more
27:38broadly?
27:40>> So, to be fair, I'd say the reason that
27:43I was focused on it was because of the
27:44index inclusion or exclusion, not
27:46because I'm you know, super bulled up on
27:49>> Okay.
27:50>> Indonesia and and the specifics.
27:52>> So, Alexander, I'm very curious. What do
27:54you think
27:55differentiates Goldman Sachs's view on
27:57the market, and also
28:00what you're sharing with your clients
28:01compared to some of the other Wall
28:03Street firms on uh just talking about AI
28:06these days?
28:07>> Sure.
28:08Um
28:09so, I'm not sure if you've heard this
28:10term one GS, uh but it's something we
28:14refer to internally to represent
28:16bringing the best of one Goldman Sachs
28:19and all of the different touch points we
28:20have with this the broader financial
28:22ecosystem
28:24to ideas, portfolios, clients.
28:27And
28:29in that vein,
28:31we have, you know, some of the best
28:33investment bankers, some of the best,
28:35you know, markets guys who are talking
28:37to, you know, people who move a
28:38tremendous amount of capital. Our
28:40private side guys are dealing with
28:42different investor types than some of
28:44the public side guys, but that
28:46ecosystem, the conversation that exists
28:49obviously under the right, you know,
28:50compliance and and firewalls and all the
28:52stuff that you have to have, but just
28:54that broader dialogue, I think elevates
28:57us because we're just so in tune
29:00to what's happening in the market. To be
29:02fair, I think we because we are the
29:04market. We are a huge part of the
29:05capital that's moving around.
29:07Um and that's why, you know, when
29:10someone asks these
29:12kind of like bombastic questions like
29:14that are zero or some, like is it over
29:16or is it forever, you know, we can give
29:18you a more rational answer about what
29:20we're seeing in the ecosystem, rather
29:22than, you know, just a
29:25you know, a guess or a research
29:27estimation, if you will.
29:29>> I think that makes sense. Um
29:31if you could leave investors,
29:34mostly independent investors, I would
29:35say, with
29:39advice for the year ahead, where would
29:40you start?
29:42>> I'd say there's so much narrative.
29:45There's so much hyperbole. There's so
29:46much dialogue, you know, there's the
29:49desire to put headlines, you know, every
29:51every 30 seconds. You got to focus on
29:54the fundamentals. The fundamentals and
29:56what is the price that you're paying for
29:58something. You should go through your
29:59portfolio and make sure that you
30:01understand every single line item, how
30:04they're correlated to one another, and
30:06what the risks are to your thesis. I
30:08think it's just it's time to be back to
30:09the fundamentals again.
30:11>> Do you think the current market has
30:13gotten away from fundamentals?
30:15>> I think it had a bit and that's why it's
30:16getting repriced. And again, going back
30:19to the risk-free rate, you know, when
30:21you have a level in Fed funds that's
30:23that high, everybody has to be a little
30:26bit more thoughtful around, "Okay, well,
30:28I could get risk-free at
30:30four plus, whatever the number is, and
30:34how does that compare to to the
30:35portfolio that I own?" The same thing,
30:38we were talking a lot about
30:39investment-grade credit, you know, right
30:40now you can get really high yields, so
30:42you have to on a very high quality name.
30:45You have to assume a certain level of
30:47growth in earnings and the stock market
30:49for next year to say, "Okay,
30:51would I rather own high quality
30:53investment grade credit, or do I want to
30:54own equities from here?" And so it's
30:58think that there's just a lot more
30:59opportunity in comparison. And so it's
31:02it's time to kind of reset and be more
31:04demanding about your marginal dollar and
31:06where your portfolio is.
31:09>> I like it. Um if we were to send people
31:12to find more of your work, where should
31:14they go?
31:15>> Uh goldmansachs.com.
31:17>> Great place. Okay.
31:18>> You can You can always, you know, Google
31:20most of the stuff that we we write and
31:22author is next to our name. Um and you
31:26know, my team, the multi-asset solutions
31:27team, is actively publishing, but so are
31:30all of the wonderful colleagues within
31:31the public and private markets.
31:34>> Thank you very much for your time. I
31:35learned a lot, and I think a lot of this
31:37is over my head, but I appreciate as
31:39always.
31:39>> Thank you for having me.

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