5 Dec 2025
It's not about the current earnings—it's about the Capex future.
And if that future changes, the market is in for a shock.
Goldman Sachs just dropped a massive warning.
The Core Risk: AI Spending Reversal
They say that our current S&P 500 valuation is priced for an incredible, long-term AI Capex boom (spending on AI infrastructure).
What if that boom stalls? If AI capex growth expectations revert to early 2023 levels, GS estimates the S&P 500 valuation multiple could see a 15-20% DOWNSIDE.
That's a huge potential correction driven only by multiple compression.
The Extreme Scenario (The Nightmare Fuel) -> Imagine the Hyperscalers slamming the brakes on spending.
🔴 The expected Capex for 2026 is approximately $433 billion. A reversion to the 2022 Capex level of $158 billion would result in a massive reduction of $275 billion—the "Lost Capex."
đź”´This $275 billion shortfall represents a 30% reduction to the consensus estimate of $1 trillion in S&P 500 sales growth. Consequently, the expected S&P 500 revenue growth rate would drop sharply from the consensus of 6% to approximately 4%.
➡️ Ultimately, this decrease in spending would pose a substantial downside risk to both the AI investment trade and the broader S&P 500 market.
The Takeaway for investors: This isn't about today's P&L. It's about the market's perception of tomorrow's AI-driven growth.
A dramatic cut in capex would signal the long-term AI earnings thesis is broken, leading to a much steeper decline in stock valuations than a simple revenue reduction would suggest.
🔑 Don't miss this point: Near-term revenues might only drop modestly, but the hit to long-term earnings growth expectations will crush valuations.
Source: Goldman Sachs, Neil Sethi
@neilksethi
