Goldman Sachs examines how the AI capital spending boom is reshaping S&P 500 profitability and valuations through its impact on return on equity. While record profitability has helped sustain elevated valuations, AI investment may create near term ROE pressure for mega cap tech even as it offers longer term productivity upside.
The Impact of The AI Capex Boom on S&P 500 Return on Equity
Goldman Sachs
Ben Snider, Ryan Hammond
Research
28 Pages
Key Takeaways
Record Profitability: S&P 500 trailing four quarter ROE reached a record 22% in Q1 2026, up 150 bp year over year and 800 bp above 1985 levels.
AI Creates Headwinds: The seven largest technology stocks generate 44% ROE today, but consensus estimates imply an average 700 bp ROE decline next year.
Valuation Linked To ROE: Goldman's model suggests every 1 percentage point change in S&P 500 ROE corresponds to roughly a 1x change in the market's P/E multiple.
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