Goldman Sachs Investment Chief: AI Advancements to Pressure Technology Sector Returns and Shift Investments to Energy and Japanese Shares

As a co-chief investment officer of multi-asset solutions at Goldman Sachs, Alexandra Wilson-Elizondo believes that returns in the technology sector (NYSEARCA:XLK) will face pressure and decrease as generative artificial intelligence advances. In an interview with Bloomberg, she mentioned that the Asset Management team at Goldman Sachs is taking profits from tech sector companies and investing in cheaper options from sectors like energy (XLE) and Japanese shares (EWJ), (DXJ).

Wilson-Elizondo stated that although her team still holds equities in the tech industry (XLK) in the portfolio, she sees a more favorable risk-reward profile in other sectors. This year, some tech companies like Nvidia (NVDA) have seen significant gains, but others like Apple (AAPL) are struggling due to weak demand from China. Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), and Meta Platforms (META) have also seen varied performance year-to-date. On the contrary, Tesla (TSLA) has experienced a decrease in value due to concerns over electric vehicle demand.

Goldman analysts are favoring energy (XLE) shares as a hedge against inflation and geopolitical risks. Additionally, they believe the U.S. economy is heading towards a soft landing, but there are still uncertainties that could change its direction. The team is cautious about utilities (XLU) and REITs (REIT:IND), (REIT) and small caps (SPSM) due to their vulnerability to high-interest rates. However, some small-cap stocks are seen as attractive due to their low valuations and may be potential targets for AI companies.