David Solomon Joins CNBC to Discuss 2Q Earnings, the Deal-Making Environment, and AI

Net revenues were up 39% year over year, 18% sequentially. Earnings up 78% year over year, 18% sequentially, and on and on from there in terms of ROE and return on tangible equity and everything else, David. I guess the question really is, is this a one-time peak as a result of this unique moment we find ourselves in, or can this really be something you expect to be a new baseline? Well, I appreciate the focus, and we had a lot of focus on the earnings call today about the forward from here. First of all, I'm so proud of our team, our people, the work they've done with our clients. I think the firm is in a position where this moment, this environment is just super aligned with what we do really well. We're in a technology super cycle that's accelerating. There's enormous demand for capital formation. We sit at the center of that with our franchises. There's a lot of strategic M&A as clients are really thinking about scale and how they can execute at scale, and those are all things that create an environment that's really aligned with our business and the way our business is positioned. What I think we're all as a leadership team really proud of, David, is that we've really spent a lot of time over the last seven or eight years investing in the growth of our franchise, the growth of our client footprint, our wallet shares through our one Goldman Sachs ethos of serving our clients in a really, really distinct way, and that's put the firm in a strong position. We've grown the revenues of the firm very materially. There's no question, and we highlighted this on the earnings call today, this environment is a very, very strong environment for our business, but the firm's bigger. It's more diverse, and I think when we look out over the next three, five, seven years and we look at the environment we're operating in, I'm not smart enough to tell you what's gonna happen in the markets in the next three to six months. No, but you've seen plenty of cycles, David. There will be cycles, but we're gonna grow the firm. Right, but this seems to be a somewhat unique moment, and I mention that because a trillion dollars in CapEx from six companies. We just saw Alphabet issue $85 billion in equity, one of the most profitable companies the world has ever seen choosing to go to the equity markets. I mean, there are those who say, wait a second, this is getting a little weird, and I would even reference your own comments where you talked on the call, there continues to be far more demand across the client segment than we're willing to engage with. There's more demand for financing than there is supply. That was Dennis, my CFO. Excuse me, I got the wrong attribution there. It's true, we're in an environment where the need for capital formation is great, and we have a significant franchise position where we have an ability, we're leaning into our clients and their demand, but there's more demand than we can meet, and that's a pretty robust environment. That gives pricing power, leverage in the business for sure. I think what I'd try to frame in this is I think the cycle of this capital formation for the AI infrastructure build, I think we're in the early innings. Now, that doesn't mean it's gonna be a straight line. That doesn't mean that every valuation of every stock or every business or the trajectory of demand is going to move perfectly along, but when you step back and you say five years from now, is there gonna be a lot of growth, a lot of productivity gains in the economy because of the deployment of this? Absolutely, and the firm's very well positioned to capitalize on it. Will there be some bumps along the way? I think so. Well, there have to be, but the bigger bump would be suddenly if everybody comes to a realization and says, wait a second, we're not gonna get an adequate return on this capital. I don't think it's that simple. I think there's capital that we're gonna get an adequate return on, and there's capital that we're not, and that's been the case in any technology expansion. There are great companies that are created. There are some companies that are stood up that don't meet the test of time and they fade away, and I'm sure we'll see both of those things in the case of this environment, but the underlying technology, the ability for that technology to be deployed broadly in enterprises and create productivity gains in the economy, I think that's real. I think it's got a lot of legs, and I think that's very good for Goldman Sachs. So to those who would characterize this period as a bubble, you would say? I would say that you can always have recalibrations and resettings when you have extremely fast movements in markets, but the deployment of capital to invest in this technology and have this technology become more embedded in enterprises and in our economy, I don't think that's a bubble. I think that's a trend that's going to have long, secular legs. Whether we get the pricing right of all the capital every minute of the day, I don't know. I'm sure we'll get some stuff wrong. You made the point about Google. Google did this very, very large- Yeah, it surprised an awful lot of people who've been doing this for a very long time. But just step back. One of the things that's interesting is people are talking about how robust the equity markets are. The IPO market was very active in the second quarter, but still, when you look at IPOs year-to-date, they're running around or under the 10-year average. I saw you talked about that, yeah. Market cap matters. You've got companies now, when people look at the size of these things, you've got to remember they're underpinned by companies that, because of their earnings power, are justifying three, four, $5 trillion valuations. So it's not surprising, therefore, that the capital needs were larger. Or enormous. But by the way, one SpaceX IPO, which obviously the lead manager on, can go a long way in terms of generating fees. One Anthropic IPO, one OpenAI IPO is far larger than all of the smaller ones. You know, the SpaceX IPO obviously was a big IPO, but when you look at our $20 billion of revenue in the quarter, the SpaceX IPO was immaterial to the $20 billion of revenue. It's just part of a puzzle of lots of client activity. You have a confluence of strategic M&A really turning on. You know, we've got an environment from a regulatory perspective where CEOs feel they have a right to really explore strategically what they can do. That's not the way they felt four years ago, and so that's positive. You have all this capital formation around the AI cycle. You have growth for people who own assets, for people that are stewarding assets in the asset management business. You have growth in assets because of market cap expansion, and so they're, you know, balancing their portfolios and redeploying. Those are all really positive things. And then look at the wealth creation, you know, going on in the world. All that's gotta go into wealth management franchises too. Without a doubt, I get it. And it's, I mean, yeah, somebody said the blast radius of just a trillion dollars just of CapEx spending is kind of what you're describing right there. Yes. It's enormous, but I guess, are we building up a risk in the system that ultimately if for some reason this thing takes a significant hiccup that we're gonna see very significant dislocations? We will see dislocations. You know, when you say very significant, you know, I'd look at the test of time. We have an incredible ability and incredible nimbleness, you know, as an economy to take the speed bumps and reorient, adjust. And I'm sure there are gonna be speed bumps, whether they're significant or not. You know, of course, in the future, if you look at an unlimited future, there'll be significant speed bumps, but I think we've got a great ability to navigate and move forward. And I do think the U.S. economy is just very well positioned in all this, given our capital markets and our leadership position, capital formation around the world, our technology innovation, and the largest, most important companies and the concentration of them that are here. You know, that kind of ecosystem combined with kind of entrepreneurship, and also there's a culture here, and I think this is very different than other places in the world. Americans wanna take risk and participate, and that's a real positive. If you go to Europe, you don't see that. You know, Europeans don't buy single stocks, take risk. Americans do, and that's part of that positive ecosystem. So there'll be bumps, but we've got a really versatile economy, and I think it's an exciting time. When I look out, I- Is there enough capital? I mean, I know it's kind of seems like a crazy question to ask, but I mean, even like your CFO said, you know, we have more demand than, I mean, I do wonder, like- There's $9 trillion in U.S. money market funds. I'm aware, I'm aware. There's a lot of capital out there. Whether or not every financial institution deploys every quarter to exactly meet demand, no, of course not. You know, in every quarter, there're gonna be constraints because people wanna manage their risk appropriately. I think one of the things we're spending a lot of time thinking about at the firm is how do we manage risk in a complex environment like this? But there's a lot of capital out there, and I'm not concerned about the ability for the capital to be available for things that make sense. Will everything make sense? No, but there's plenty of capital out there to support this kind of investment in technology in the economy.