[Goldman Sachs Report] Reality Check on AI and the Return of Physical Assets

Subtitle: Where is the massive capital heading after waking up from the software bubble?

Original Report Date: February 20, 2026

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📌 3-Line Summary

• Cooling AI Hype: Nvidia's investment scale-back and the AWS autonomous AI error are sending a strong 'reality check' signal to blind AI investment sentiment.
• Capital Outflow Realized: The economic moats of software companies are being threatened, leading to a plunge in the related ETF (IGV) (-22%) and a halt in redemptions for private credit funds heavily invested in tech.
• Shift to Physical Assets: Capital exiting the virtual space (software) is rapidly moving into 'Physical Assets' such as energy, infrastructure, and raw materials, which are essential for data center construction.

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📖 In-Depth Report Analysis

In this recent report, Goldman Sachs (GS) diagnosed that the stock market's leadership is undergoing a massive shift. The focus is moving rapidly from the AI and software sectors—which have fueled the market over the past few years—to previously neglected commodities and physical assets. This isn't just a shift in sentiment; it is reflected in actual data showing massive capital flows and corporate strategy adjustments.

1. Nvidia's Investment Cut and the 'Cooling AI Hype'

The biggest talking point in the market is the deceleration of the AI industry.

• Nvidia's Risk Management: Goldman Sachs noted (citing the FT) that Nvidia is highly likely to drastically scale back its direct equity investment in OpenAI to $30 billion, down from the initially discussed $100 billion infrastructure partnership.
• Implication: Amid potential data center oversupply, this indicates that even a core company is taking steps to reduce its financial exposure—a clear sign of the "cooling AI hype." While OpenAI secures immediate liquidity, questions about its long-term funding remain.

2. The Danger of 'Autonomous AI' Revealed by the AWS Outage

Concerns surrounding AI are spreading beyond financial risks to issues of technical reliability.

• Cause of the AWS Outage: The recent two major AWS system outages were not caused by external attacks, but by errors in Amazon's internally developed agentic (autonomous) AI assistant, 'Kiro'.
• Implication: This starkly highlights the immense potential risks of deploying autonomous AI—which codes and alters systems on its own—into core infrastructure. It is fueling fundamental doubts within corporations regarding the reliability of AI tools.

3. Software Companies' 'Economic Moats' Under Threat

These technological shifts are dealing a direct blow to the valuations of traditional software companies.

• Bear Market Scenarios: GS software analyst Gabriela Borges warned that the rapid evolution of agentic AI makes it incredibly difficult to gauge the value floor for existing software business models, presenting 7 distinct bear market scenarios.
• Conditions for Survival: She advised that in a landscape flooded with general-purpose AI, market stabilization requires proving that only software with 'vertical expertise' (specialization in specific industries) can survive and deliver high-quality results.

4. Realized Capital Outflow: ETF Plunge and Redemption Halts

The uncertainty in the software industry is translating into actual capital flight.

• Stock Market: Driven by factors like Nvidia's investment cut and the AWS incident, the IGV index—a benchmark software ETF—has plummeted by 22% so far this year.
• Credit Market Contagion: A more severe issue is the shock to the credit market. Massive private credit funds like Blue Owl, along with other major asset managers like Apollo and Blackstone, have begun restricting quarterly redemptions (locking up funds) for portfolios heavily lent to tech companies. This suggests the massive capital that rode the AI wave is now contemplating its exit strategy.

5. The Return of the Era of 'Physical Assets'

Funds exiting tech stocks are making their way toward tangible assets.

• Sectors in the Spotlight: As the physical constraints essential for data center expansion—such as power, water, and labor—come to the forefront, the value of commodities, energy, and infrastructure assets is being heavily re-evaluated.
• Energy Market Trends: In the oil sector, discussions are shifting back to 'growth and reserve life', with capital expenditures (CapEx) on the rise. (e.g., Oilfield services company Tenaris saw its stock surge +9% post-earnings).
• Factors Supporting Oil Prices: Goldman Sachs analyzed that sanctioned crude oil unable to land and stuck at sea creates 'land scarcity.' This phenomenon is supporting global oil prices despite an overarching oversupply.

6. Market Diversification and Macro (Interest Rate) Outlook

• Diversification of Returns: Stock market returns are broadening from a handful of Big Tech firms to a wider variety of sectors. 57% of large active mutual funds are currently outperforming their benchmarks (the highest level since 2007), indicating a broad-based market rally. Capital allocation to European equities is also noticeably increasing.
• Retreating Rate Cut Expectations: Expectations for early Fed rate cuts have receded. Without a definitive drop in inflation, further cuts will be difficult. Unless the labor market weakens sharply, the next rate cuts are projected for June, followed by September.

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💡 StockHub Insight & Comments

This Goldman Sachs report serves as a crucial signal that the party of "boundless AI optimism" is ending, and the moment to face the cold "bill" has arrived.

The core narrative has shifted from the vague expectation that "AI will change the world" to a very practical question: "How will we bear the massive costs, infrastructure requirements, and potentially fatal errors of running AI?"

Investors should pay attention to two main points:

• Redefining 'Picks and Shovels': Just as those who sold pickaxes made the real money during the Gold Rush, the true beneficiaries of the AI era are being redefined. It's not the software companies building AI models, but the power grid, energy, and physical infrastructure companies that are absolutely essential to run them.
• Prolonged High Rates and the Rise of Value Stocks: A macro environment where the Fed delays rate cuts is a headwind for high-growth tech stocks that borrow against distant future cash flows. However, it creates a relatively favorable environment for traditional industries (energy, materials, industrials) and European markets that are generating solid current earnings and boast cheaper valuations.