Goldman Sachs CEO David Solomon: AI is a longterm secular trend, don't see it reversing

Welcome back. Let's get to our Leslie Picker in Las Vegas this morning joining us in a CNBC exclusive with the chairman and CEO of Goldman Sachs David Solomon live from the company's private innovative company conference morning, Leslie Good morning CQ David. Thank you so much for doing this. I'm delighted to be here with you again, Leslie It's great for you to come back here delighted to be here with you again, too So as Carl mentioned, we're here at a private innovative companies conference So let's start the conversation with the innovative economy because that has really been in focus for the markets these days You said in early October that you wouldn't be surprised to see a drawdown in the next year or two because that's what happens Historically with an acceleration new technology when markets can run ahead of their potential Given what we've seen over the last few weeks Do you feel like the froth has been fully taken out of the market or do you think there's still some remnants of it? Well first, I just want to say thank you for being here. This is an incredible conference. We have Hundreds and hundreds of companies and hundreds of investors that are here to really look at what is the core of the innovative economy Which is new companies and entrepreneurs that are building great companies that ultimately CNBC will talk, you know talk about five ten years from now as they go public they raise more capital and so this is really a great event and I love coming to this event because I really get a chance to meet with so Many of these entrepreneurs and when I think about you know Our economy and what goes on here and why the u.s. Is in such a preeminent position this entrepreneurial Innovative economy, which we really have in spades compared to almost any other economy in the world is really one of the things that makes America so exceptional so glad to be here happy to have you on the bigger hyperscaler AI economy What I'd say is I'm you know, I'm not surprised there's a little volatility in markets, you know at the same point I'll repeat what I've said, you know constantly about this. I'm super excited about the technology I think the investments that are being made to set this technology up So it can be deployed in the enterprise is extremely exciting. It's going to create enormous productivity gains in the economy at the moment the world is basically looking at all the things that can go right and they're discounting the things that can go wrong and They think the pace of adoption the pace of adoption on all this infrastructure as it goes into place is gonna be really really quick I think it's going to come it's probably gonna go a little bit slower And I think as the market really adjusts to just the pace of adoption now this capital that's being invested Is producing returns you'll see ups and downs and speed bumps and drawdowns of accelerations I mean, I think that's going to continue for a number of years But the general direction and the opportunity set and the power of these models I know that Google just released Gemini 3, you know yesterday what people were saying about that the power of these models and the ability To ultimately deploy this in the enterprise and really drive huge productivity gains. It's very exciting, but it's hard to get this stuff deployed It's hard for companies to underwrite new processes and their organizations and I you know, I think it's gonna take some time And so I'm not surprised by what we're seeing, but I'm still very optimistic How does that filter through to some of the concerns around the financing the pace of adoption ultimately? Hopefully will one day translate into revenue and cash flow that will be used to hopefully Pay back some of the debt the debt that's being raised in order to fund some of this But there are some concerns that the pace of adoption is too slow and that those debt obligations won't ultimately be met as you talk Clients as you talk to investors in the markets, is that a valid concern? Well when you when you talk about them, you know debt and capital there are a lot of things that are mixed together Obviously the big hyperscalers are big businesses that have enormous cash flow and there's no question They're taking more of their cash flow and investing it in these projects, but they still have a lot of free cash flow These are the biggest most profitable companies in the world and I think they stand pretty strong to the obligations they're making when people look at data centers and The financing of data centers. Those are like real estate deals at the end of days. Those are real estate deals You're putting something in the ground. It's got an outtake. There's Debt that has to be servicing that it's really about the creditors that are taking, you know The output of those data centers and the creditors are really the best biggest companies in the world I don't get too concerned about that where you know I think it gets more complicated is when you're talking about new companies and private capital formation and they're going to be winners and losers and That's more risk capital and there it's harder to predict who the winners and losers will be But there's a lot of capital being deployed and there's a difference between capital not getting great returns when big companies deploy it But they still have lots of cash flow that ultimately makes their stock go down a little bit There are also companies where people have real risk capital and trying to create new companies new businesses and some of those are going to Turn out to be incredibly large profitable companies and some of them will go away Just as we've seen in past cycles and you know, those things are harder things to judge how should we think about the risk there because AI has been such a key driver a key component of Everything from productivity to GDP growth people are calling it deflationary as we're in You know kind of period of sticky inflation if that all reverses then what happens to the economy? I don't think it's I don't think it's reversing Okay, this is a long-term Secular trend and I do think you have to go back and look at other long-term secular trends They they ebb and flow but the long-term trends in place So if you and I are sitting here and asking what's going to happen 15 years from now I've got a lot of confidence that the economic benefit the productivity gains from this technology being deployed in enterprises broadly We're gonna be extraordinary and that's gonna be very very good for growth in our economy and productivity in our economy You know if we start talking about six-month windows, you know obviously it can be choppier and there can be there can be bumps and there can be volatility, but Everyone likes to it's it's you know, I have a friend that recently was talking about, you know Skeptics seem very smart, but optimists make a lot of money Yeah, and you know, I think it's really important to recognize this a long-term secular trend as risk managers We have to be very focused on short-term risks I think that's important but you know a narrative that that's something like this is gonna you know in the near term Blow up the economy I can't obviously say there can't be very very significant financial issues in the future on a whole range of topics But in the distribution, it's a small distribution. You know, these are important technologies We have big important companies deploying them and I think the benefit to our economy overall is gonna be very significant in the coming years But there are things that I think are overvalued and more highly valued than I think they should be and probably won't produce the earnings That some people imagine at the moment and that's that's normal in any one of these acceleration cycles One of the the key areas that's financing a lot of this data center build-out has been private credit It's an area that people in recent weeks as we kind of think about AI whether there's a bubble whether there's not a bubble whether the Debt loads are eye-popping and scary kind of the role that private credit plays into all of this and there have been some headlines recently about Questions around the marks that private credit managers are taking whether they're truly reflective of their underlying assets We reported this morning about Blue Owl terminating the merger of its two funds in order to basically appease some of the volatility that And and backlash it faced as a result of that you have a very sizable private credit business at Goldman Sachs How do you look at all of this and especially in the context of some of the reputational concerns that are out there right now? well, I Private credit is a very very big business credit is a very very big business and Goldman Sachs is an interesting You know an interesting organization in this context because we're one of the few organizations that operates as a bank It is a regulated lender. We also have a big asset management business with a very very large private credit business We're also a huge arranger and an intermediary in the formation of credit You know, we really sit across the spectrum and we see all aspects of the business I think one of the things that's important to do is is is make sure we're very clear when we're talking about different things Private credit is a business and I thought Craig Packard did a pretty good job today Articulating, you know what goes on in their public funds and their private funds lends to Companies that are important companies in the economy and they lend to those companies They are generally below investment grade, you know below investment grade companies we're talking about direct lending and these companies have cash flow and they're big companies and if the economy's Doing well, which by the way, the economy has been doing well We haven't had a credit cycle for quite some time The performance of those portfolios is generally pretty good when we do have an economic contraction or we do have a recession You're gonna see more difficult performance in those portfolios. That's very different than private credit financing data centers Okay, and capital financing data centers and again data centers like real estate deals Who is the end, you know the end takeoff, you know provider So if if you're relying on some of this data center financing on people like Google or Meta or Amazon Okay, that's very different than if you're relying, you know on a company with different, you know different credit standards So these are all different aspects of lending. They're all different. The credit risks are different One of the things I've said about credit generally is it's a process business Your underwriting standards how you manage risk how you run your underwriting processes how you manage your portfolio? Very very important and I think there are people that are very very good at it And of course, you know when we have an economic recession or we have a contraction You're gonna see who's better at it and who's worse You know, we spend a lot of time on this because we've been doing this for you know for 40 years So we've been in these businesses for a long long time, but I think discipline risk management very very important in these businesses But it's hard to see Where the real issues are until you have a real credit contract a credit contraction from a recession or an economic slowdown We don't have that at the moment