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Goldman Sachs Analysis: Artificial intelligence Sector Shows Resilience

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Artificial intelligence (AI) is witnessing extensive worldwide integration, as evident from the growing utilization of AI-related technologies and the upswing in AI stock values. This trend has led prominent economists to draw parallels with the late 1990s dot-com bubble, which eventually led to a market collapse. Nevertheless, Goldman Sachs takes a different stance on this matter. In a recent communication, Peter Oppenheimer, the Chief Global Equity Strategist at Goldman Sachs Research, presents a contrasting perspective. They said,

“Even as those stocks have rallied substantially, they don’t appear to be in a bubble. We believe we are still in the relatively early stages of a new technology cycle that is likely to lead to further outperformance.”

The process of “outperformance” seems to be in progress, as the sector gains acknowledgment for its contribution to the stock market’s momentum. Approximately 20 companies, mainly in AI-related fields, have been instrumental in bolstering the S&P 500, nudging it towards positive gains. As previously indicated by Manish Jabra, who leads US equity strategy at Societe Generale, stated, “The AI boom and hype is strong. So strong that without the AI-popular stocks, S&P 500 would be down 2% this year.”

Artificial Intelligence

Moreover, a significant number of investors have made substantial investments in anticipation of a surge. As an illustration, Precedence Research foresees an annual growth rate of 23% in Artificial intelligence software sales, with projections reaching $2,575.16 billion by 2032. Despite the considerable optimism surrounding the AI sector, there exist certain obstacles that could impede its ability to surpass expectations.

The Impending Hurdles for Advancing Artificial intelligence

Volatility

The stock prices of Artificial intelligence firms tend to exhibit significant price fluctuations because they are still in their “early phases.” To illustrate, Upstart Holdings [UPST] demonstrated an impressive performance in the Nasdaq 100 Stock Index [$IUXX] [QQQ] at the beginning of August, experiencing a substantial increase of +445%. This surge was largely attributed to the excitement surrounding AI. However, the stock’s worth has since decreased by 50%, underscoring the potential risks associated with stocks that become entangled in the AI frenzy.

Regulatory hurdles

When OpenAI first introduced ChatGPT, there were limited regulations and minimal widespread interest in this field. However, the significant expansion of ChatGPT has now drawn the attention of regulators globally. For example, the EU Artificial intelligence Act is currently in development, with a primary focus on regulating the industry based on risk levels, with more stringent oversight applied to higher-risk AI technologies. The European Union has taken a prominent role in this area, surpassing both the United States and China in terms of regulatory initiatives.

Nonetheless, there is a growing emphasis on the need to regulate this field. Additionally, influential figures such as Elon Musk, Bill Gates, Mark Zuckerberg, and others have convened to discuss the future of Artificial intelligence regulations, potentially wielding substantial influence over the sector.

Reliance on Data

The efficient operation of AI systems relies heavily on extensive datasets. Disruptions like data breaches, challenges with data accuracy, or difficulties in accessing vital data repositories can hinder the effectiveness of AI enterprises.

Competitive Landscape

The AI sector is characterized by fierce competition, with numerous startups and established tech giants vying for market share. This intense rivalry has the potential to reduce profit margins and limit avenues for growth.

These observations suggest that there may not be a speculative bubble in AI stocks. Nevertheless, it remains crucial for investors to conduct comprehensive research and assess the specific fundamentals of individual companies. It is imperative to carefully consider their investment goals and risk tolerance.

Goldman Sachs is Eyeing to Acquire Troubled Crypto Firms After FTX Collapse

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Following the collapse of the FTX exchange, which hurt valuations and reduced investor interest, Goldman Sachs (GS.N) announced plans to spend tens of millions of dollars to buy or invest in cryptocurrency businesses.

According to Mathew McDermott, head of digital assets at Goldman, the collapse of FTX has increased the demand for more dependable, regulated cryptocurrency players, and big banks see an opportunity to pick up business.

Goldman Sachs is doing due diligence

He resumed without delivering more details, “Goldman is conducting due diligence on a number of different crypto firms.” “We do see some really interesting opportunities, priced much more sensibly.”

After its abrupt collapse on Nov. 11, FTX filed for Chapter 11 bankruptcy protection in the US, raising concerns about contagion and escalating calls for more regulation of the cryptocurrency industry.

“It’s definitely set the market back in terms of sentiment, there’s absolutely no doubt of that.” “FTX was a poster child in many parts of the ecosystem. But to reiterate, the underlying technology continues to perform.”

McDermott said

Even though Goldman Sachs’ potential investment is modest compared to the Wall Street giant’s $21.6 billion revenue last year, it is clear from its willingness to continue investing that it sees a long-term opportunity.

While he considers cryptocurrencies to be “highly speculative,” its CEO David Solomon told CNBC on Nov. 10 as the FTX drama was playing out that the underlying technology has great potential as its infrastructure becomes more formalized.

Noel Quinn, CEO of HSBC (HSBA.L), stated last week at a banking conference in London that he has no plans to expand into retail customer crypto trading or investing.11 digital asset businesses that offer services like compliance, cryptocurrency data, and blockchain management have received investment from Goldman.

McDermott, a triathlete in his free time, joined Goldman in 2005 and quickly advanced to lead the division of its digital assets after leading cross-asset financing.

His team now numbers more than 70 individuals, including a trading desk for cryptocurrency derivatives and options with a staff of seven. Additionally, Goldman Sachs, MSCI, and Coin Metrics have launched the data service datonomy with the goal of categorizing digital assets according to their intended use.

According to McDermott, the company is also developing its own proprietary distributed ledger technology.

Crypto Investors Gear Up For Goldman Sachs’ $2B Shocker

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Crypto Market’s leading assets traded in the green on June 27, after going through major downdrafts. Bitcoin, XRP, Cardano, Doge, and the like have recovered after months of downturn. Dogecoin and Solana in particular have regained over 20% in the weekly index.

Bitcoin’s price too rebounded 20% since crashing to a low of under $18,000 last week.

But a recent report of Wall Street giant Goldman Sachs looking to raise $2 billion to buy up distressed assets of beleaguered crypto lender Celsius has generated quite an attention.

Anonymous sources familiar with the matter said if the proposed deal goes ahead, investors would be able to buy Celsius’ assets at potentially steep discounts in the event of a bankruptcy.

The move comes after Goldman’s recent bullish push into crypto, including establishing its own trading desks and gauging interest from institutional investors in lending products.

For those new to the market, Celsius was on the brink of insolvency after suspending user withdrawals from the platform earlier this month, citing “extreme market conditions”. This in turn accelerated a price crash that sent bitcoin spiraling under $20,000.

According to a Forbes report, Goldman Sachs’ reported deal for Celsius’ crypto assets is likely to infuse some degree of confidence into crypto traders who were left rattled by the mega sell-offs.

Recently. digital assets exchange FTX was reportedly in talks to acquire a stake in BlockFi after the trading platform extended a $250 million credit to the lending firm.

Crypto Bailouts To Embattled Projects

According to a report from the Wall Street Journal, FTX is currently in talks with BlockFi regarding purchasing a stake in the firm, but so far no equity agreement has been finalized.

FTX founder and CEO Sam Bankman-Fried a.k.a SBF, has provided a helping hand to many crypto projects amid a bear market that forced many firms to cut down staff.

However, it’s not clear if FTX’s reported intent to buy a stake in BlockFi was linked to financial difficulties at the crypto lending firm amid a bear market.

On 22nd June, Trading firm Alameda Research, under SBF’s management, announced it had provided loans worth 15,000 Bitcoin [BTC] to Voyager Digital which is seeking to cover losses from its exposure to Three Arrows Capital [3AC].

Goldman Sachs and Barclays Spearhead $70M Funding Round For A Crypto Fintech

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Leading investment banks Goldman Sachs and Barclays are among the few to lead a $70 million funding round for a UK-based crypto trading platform Elwood Technologies, which valued the firm at around $500 million, according to a report by Financial Times.

The funding exercise was supported by crypto-friendly German bank Commerzbank, digital asset investment manager Galaxy Digital and Dawn Capital. Elwood was founded by billionaire British hedge fund manager Alan Howard.

The latest backing is another example of the growing adoption of digital assets despite the prevailing market condition.

Speaking on the financial round, Elwood Technologies CEO James Stickland said the fundraising was “another validation of the longevity of crypto” brushing off the falling prices from the last few weeks:

We’re getting investments from financial institutions that aren’t expecting to get massive returns in 15 minutes. They’re investing in the infrastructure, I think it’s a reassurance message.

Elwood Technologies provides a crypto portfolio management system with crypto market information and trading infrastructure for institutional investors that features an interface that connects to crypto exchanges, liquidity providers, and custodians.

Commenting on the deal, Goldman Sachs’ global head of digital assets Mathew McDermott, stated that the investment reflects its “continued commitment” to cryptocurrencies. He then added

“As institutional demand for cryptocurrency rises, we have been actively broadening our market presence and capabilities to cater to client demand.”

Goldman Sachs’s Massive Crypto Push

Last month, Goldman Sachs [GS] offered its first bitcoin-backed loan which signifies Wall Street’s deepening crypto ties. The banking giant claimed its’s secured lending facility enabled a borrower to use bitcoin as collateral for a cash loan.

Goldman, which has a dedicated digital assets team, traded its first over-the-counter bitcoin options to Galaxy Digital in March.

Looks like the investment firm is following in the footsteps of other traditional finance giants moving further into crypto. A few months ago, Cowen launched a digital assets unit and BlackRock [BLK] participated in the  $400 million funding round for USDC stablecoin creator Circle.

With regards to Elwood, the firm will continue to have Howard as the majority stakeholder, who had been one of the UK’s most prominent investors to take the plunge into crypto markets.

Coinbase Seems to Be the 1st Ever Bitcoin-Backed Loan Acquirer From Goldman Sachs

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The mysterious corporation that took out Wall Street’s first bitcoin-backed loan from Goldman Sachs has been exposed as Coinbase, America’s largest crypto exchange. Goldman Sachs controls $2.5 trillion in assets as of 2021.

Coinbase has taken out a Bitcoin-backed loan from Goldman Sachs, according to Bloomberg, as part of a strategy to strengthen ties between the crypto and trading worlds.

Coinbase Institutional Head Brett Tejpaul said, “Coinbase’s work with Goldman is a first step in the recognition of crypto as collateral, which deepens the bridge between the fiat and crypto economies.”

The loan’s cash amount was not disclosed, but it was backed by a portion of Coinbase’s total holdings of 4,487 Bitcoin, which are presently valued at almost $170 million. The loan includes a 24-hour risk monitoring system, as well as a requirement that Coinbase fills up its BTC collateral if prices fall too low.

Coinbase’s first bitcoin-backed loan

While Bitcoin and other crypto-backed loans are common in the crypto industry, particularly on DeFi protocols, they are uncommon in traditional banking, where crypto is seen as far too risky and unpredictable as collateral.

Asset management firm Arca indicated in a May 2 blog post that potential borrowers are looking for more such opportunities. It claimed that “[this loan] demonstrates institutions’ willingness to utilize new tools with traditional methods.”

Brian Armstrong on free speech

Meanwhile, Coinbase CEO Brian Armstrong has laid out his vision for decentralized social media networks that allow for free speech.

He told the Milken Institute on May 2 that Twitter, now owned by Elon Musk, had the opportunity to “essentially embrace adopting a decentralized protocol” that the network could function on.

“I believe that freedom in all forms is worth preserving, and a lot of crypto is about economic liberty.” Another version is the right to free speech.”

Armstrong argues that a decentralized social media network would enable content producers to choose their own moderation standards. Access to all material would be democratized rather than algorithmically determined.

This would prevent certain content streams on a platform from being stifled, allowing users to see whatever they want.

Goldman Sachs unites with Galaxy Digital to offer ETH fund

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Leading global investment bank Goldman Sachs [GS] has partnered with diversified asset management firm Galaxy Digital to offer its clients access to ether [ETH]. This is in accordance with regulatory documents filed with the U.S. Securities and Exchange Commission [SEC] on 8th March.

Filings show that with an investment of at least $250,000, the fund has collected over $50 million from 28 clients. It’s not known exactly how much GS is responsible for as the investment bank was not involved when it first launched.

As stated in the amended Form D filing, “Goldman Sachs & Co. LLC will receive an introduction fee” for a number of clients it brings to the “Galaxy Institutional Ethereum Fund.” Sources revealed that the latter had issued that fund last March.

Galaxy Digital is not the first time Goldman Sachs has collaborated with. Previously in June, Galaxy agreed to pour liquidity to Goldman Sachs’ Bitcoin [BTC] futures offering. Besides that Galaxy also offers a bitcoin fund to Morgan Stanley [MS] clients in a similar arrangement, a review of the filings shows.

Apart from GS, an alternative investments platform called CAIS Capital LLC will receive “placement fees” for referring clients to the institutional fund, Tuesday’s SEC filing said. It’s separately involved in a different Galaxy-backed Ethereum fund whose filing also hit Tuesday.

The latest development has its roots back in mid-2021 when Mathew McDermott, head of digital assets at Goldman announced that the investment bank was working to offer options and futures trading in Ether.

Goldman Sachs hit with talent exodus

The bank recently grabbed headlines when its global co-head of operations Roger Bartlett, a 16-year veteran announced joining crypto exchange Coinbase to lead its financial operations, in a LinkedIn post, just weeks ago.

In May 2021, crypto exchange Coinbase hired Goldman’s former co-head of government affairs Faryar Shirzad as its new chief policy officer to help with lobbying efforts.

Similarly, Chris Perkins, a former Citigroup executive who had around 725 employees working under him, left last September to become the president of crypto investment firm Coinfund. As reported by Financial News, crypto has become a much sought-after career option for executives, especially at large investment banks.

Goldman Sachs praises Ethereum’s use-case advantage Ethereum in the latest letter

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The altcoin season has approached sooner than expected with multiple coins shooting up the price charts. Ethereum, the largest altcoin in the world, has had a tremendous year with a growth rate of 854 percent. Although the climb was punctuated with bear dips, major financial institutions were putting their faith in Ethereum to overtake Bitcoin. Goldman Sachs recently praised the Vitalik Buterin co-founded cryptocurrency and its widespread use cases.

Being one of the largest banks in the United States, Goldman Sachs’s comments play a big role in paving the way for mainstream cryptocurrency adoption. In a note to clients on Tuesday, the bank stated that Ethereum had “real use potential” which was the first step to becoming the “dominant store of value”. A lot of decentralized applications [dapps] built on Ethereum have taken off, prompting other organizations to jump on the bandwagon.

The letter from Goldman Sachs read:
“[Ether] currently looks like the cryptocurrency with the highest real use potential as Ethereum, the platform on which it is the native digital currency, is the most popular development platform for smart contract applications.”

At press time, Ethereum was surging at $2378 with a total market cap of $276.8 billion. A 111.3 percent price increase over the past week allowed the cryptocurrency’s daily trading volume to clock $23.9 billion. Only Binance Coin’s 13 percent weekly gain was ahead of Ethereum in the top 10 cryptocurrency club. Goldman’s comments on Ethereum come a few weeks after analysts from the bank had called the cryptocurrency that may not be as “inevitable” as people thought it was.

According to some financial analysts, the competition among cryptocurrencies was a major risk factor when mixed with user holdings. They added that once digital assets come out of their nascent stage, they can try to qualify to become a safe haven asset. Insider sources within the cryptocurrency world, however, only had glowing reviews for the world’s largest altcoin.

Celsius Network CEO Alex Mashinsky recently said that Ethereum had already surpassed Bitcoin in dollar holdings at the company’s repository. In his words:

“The flippening already happened. The broader market will soon follow the Ethereum overtake in the next year or two.”

Goldman Sachs leads repo trade via JPMorgan’s blockchain network

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Goldman Sachs, the multinational investment bank and financial services company, has reportedly joined JP Morgan’s Repo blockchain network. As part of this, the company carried out its first repo trade using JPMorgan’s private blockchain network.

Goldman Sachs had led the initial trade on the 17th of June that involved exchanging a US Treasury bond for JPMCoin which took three hours and five minutes to complete. The entire transaction was quantifiable in nature since it could pinpoint the accurate amount of time required for completion. Hence, this was in contrast to the traditional repo market.

Following the development, Mathew McDermott, global head of digital assets for Goldman’s global markets division was quoted saying,

“We see this as a pivotal moment for the digitization of transactional activity.”

According to the exec, identifying the precise time is a big step up from the current market, as is the way the collateral and cash are interchanged simultaneously and immediately, the report said. McDermott also went on to add,

“We pay interest per the minute,” he said. “We firmly think this will change the nature of the intraday marketplace.”

The Repo blockchain was first unveiled in December sits within JP Morgan’s Onyx branch, which hosts multiple blockchain offerings. Goldman Sachs became the first to reveal that it was using the enterprise blockchain network, with BNY Mellon offering custody.

For the uninitiated, repurchase agreements, or better known as “repos,” are essentially a kind of loan where collateralized securities sold by financial establishments in a contract are bought back at a slightly higher cost some other time, usually on an overnight basis.

Goldman Sachs’ Tryst With crypto

Goldman Sachs was previously one of the many pessimists that doubted Bitcoin’s capabilities. However, since the foray of massive institutional capital into space, Goldman took a whole 180-degree turn on its previous stance.

The company had recently started trading Bitcoin futures after it partnered with Mike Novogratz-founded cryptocurrency merchant bank Galaxy Digital. A week back, Goldman Sachs had also revealed its plans to offer options and futures trading in Ether [ETH].

Goldman Sachs moves over Bitcoin as it steers towards Ether

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Prominent bank, Goldman Sachs revealed that it would be elevating its crypto trading service with the inclusion of Ether [ETH].

Ethereum [ETH] witnessed a prominent plunge over $1K all the way on to an all-time high of $4K. The altcoin certainly stood out during the last crypto rally overshadowing several assets. While the latest bear invasion destroyed the gains amassed by coins like Bitcoin [BTC], Binance Coin [BNB], and many others, Ethereum managed to retain itself at $2.5K.

Even though Bitcoin remains the most popular cryptocurrency, many have been eyeing Ethereum as well as other cryptocurrencies. Goldman Sachs seemed to be the latest platform expressing interest in onboarding another crypto asset apart from Bitcoin.

Goldman Sachs’ head of digital assets eyes Ether

Speaking with Bloomberg, the head of digital assets at Goldman Sachs,  Mathew McDermott revealed that the bank was looking forward to offering futures as well as options trading in Ether. While the bank had previously made news for embracing Bitcoin, its latest move comes as a plunge towards the same.

McDermott detailed,

“We’ve actually seen a lot of interest from clients who are eager to trade as they find these levels as a slightly more palatable entry point. We see it as a cleansing exercise to reduce some of the leverage and the excess in the system, especially from a retail perspective.”

With volatility striking the crypto market, the price of cryptocurrencies witnessed a massive fall. This further insinuated several investors to pull out from the industry. Goldman Sachs, however, seemed to be sure about its venture into the crypto-verse. McDermott stressed how the interest in crypto would prolong without a stop despite the price change of digital assets.

He added,

“Institutional adoption will continue. Despite the material price correction, we continue to see a significant amount of interest in this space.”

The bank’s crypto-friendly moves over the last couple of months have certainly lured investors into the market.

Goldman Sachs To Offer Notes Linked To ETF That May Give Exposure To Bitcoin

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Goldman Sachs, the American multinational investment bank and financial services company has filed with the US Securities Exchange And Commission [SEC] to offer an investment product that could give exposure to its clients to cryptocurrency such as Bitcoin.

This new investment product is tied to the performance of the ARK Innovation ETF, which is capable of investing in Bitcoin and products and services inside the crypto-asset’s boundary. While Goldman Sachs filing is not for a Bitcoin ETF, however, the product that would track an ETF exposed to the share of the cryptocurrency indirectly via an investment in a grantor trust.

The filing by Goldman Sachs stated,

“The ETF is an actively-managed exchange-traded fund that will invest under normal circumstances primarily (at least 65% of its assets) in domestic and foreign equity securities of companies that are relevant to the ETF’s investment theme of disruptive innovation. The ETF investment advisor defines “disruptive innovation” as the introduction of a technologically enabled new product or service that potentially changes the way the world works.”

Goldman Sachs And Its Change Of Heart For Bitcoin

The news comes a couple of weeks after the international banking giant’s COO John Waldron had revealed exploring Bitcoin ETF and custodial services with the US regulator due to the growing demand for the underlying cryptocurrency. In addition, the bank had also recently rolled-out its cryptocurrency trading desk again in a bid to support futures trading for BTC.

It is important to note that Goldman Sachs is among the country’s banking organizations that have not been a fan of Bitcoin for the longest time. Just last year, the multinational bank had called that Bitcoin is “not an asset class”. However, the change of winds could essentially strengthen Bitcoin’s position in the traditional finance world.

Currently, there are seven Bitcoin ETF applications in the US apart from Goldman Sachs. They are – Fidelity, SkyBridge, Morgan Stanley/NYDIG, VanEck, Valkyrie, WisdomTree, and Bitwise. This essentially meant that Bitcoin is just a green light away from huge capital inflows.