Goldman Sachs CEO warns of financing risks in AI infrastructure buildout

Goldman Sachs chief executive David Solomon has highlighted significant financing risks associated with the rapid expansion of artificial intelligence infrastructure. Speaking during the bank’s third-quarter earnings call, Solomon noted that the scale of required investment presents challenges that extend beyond the financial sector. The bank reported strong results for its stock market businesses, with equities revenue increasing by 72 per cent compared to the same period last year. This performance underscores the growing demand for computing power, which currently exceeds supply, creating substantial opportunities for the bank to arrange financing for these projects.

In his opening remarks on Tuesday, 13 October, Solomon referenced studies estimating that data centre construction in the United States could require more than $10 trillion through 2032. This figure represents an average of roughly 3.6 per cent of annual U.S. economic output. Despite the magnitude of this opportunity, Solomon emphasised that Goldman Sachs is adopting a selective approach to the financing risks it assumes and the capital it commits. This caution is driven by the increasing size and complexity of individual projects. The eventual demand for computing capacity, and consequently the funding required to supply it, remains uncertain, adding a layer of risk to long-term investment strategies.

During the analyst discussion, Solomon addressed the possibility that financing could become a bottleneck for AI capital spending. He suggested that growing borrowing needs could exert upward pressure on interest rates. Such an increase would affect potential returns and could determine whether individual projects remain financially viable. Solomon acknowledged that a recalibration or reset in the market is inevitable, though he noted that predicting the timing and impact of such a shift is extremely difficult. He stated that while there will likely be some turbulence when this adjustment occurs, the precise nature of the market response remains hard to forecast.

For the time being, the shortage of computing capacity points towards continued construction and financing activity. Solomon expects this expansion to draw capital from both public and private markets through borrowing and investment in company ownership. Chief Financial Officer Denis Coleman added that the largest companies driving this expansion possess substantial cash reserves from their core businesses to help fund their initiatives. Solomon expressed confidence in the technology’s continued growth, despite constraints related to power, labour costs and financing. However, he acknowledged that higher interest rates, geopolitical instability and local opposition to data centres could slow the pace of project development.

Looking ahead to the fourth quarter, Solomon indicated that technology investment and AI infrastructure should support fundraising and deal activity, although he warned of potential setbacks. He described the underlying U.S. economy as solid, citing corporate earnings growth, 2.2 per cent GDP growth and a resilient labour market. Globally, renewed tensions in the Middle East and disrupted energy flows have raised oil prices and inflation concerns. Further interest rate volatility could weigh on activity, but Goldman continues to observe strong client demand. Solomon’s outlook suggests that companies are not postponing decisions until conditions stabilise. Instead, businesses are actively moving to modernise operations, acquire new capabilities and direct funds toward their most promising opportunities, thereby sustaining demand for advice and financing.

Goldman reported quarterly net revenue of $18.68 billion, up 23 per cent from a year earlier but down eight per cent from the second quarter. Net earnings totalled $5.29 billion, with earnings per share rising to $17.01 from $12.25 a year earlier. Equities revenue reached $6.44 billion, while investment banking fees increased 21 per cent to $3.22 billion, supported by completed mergers and acquisitions and stock offerings.