Finance

Goldman Sachs’ S&P 500 Forecast: Did the AI Boom Outsmart the Experts?

Goldman Sachs’ 2024 prediction of slow S&P 500 returns was outperformed in the past year by 14.9%, fueled by AI.

October 16, 2025, 11:10 AM

The Goldman Sachs logo displayed on a mobile phone screen with an overlay of financial market graphics. By sdx15 / Shutterstock.com.

Executive Summary

Goldman Sachs’ prediction of slow S&P 500 returns (around 3% over 10 years) has been significantly outperformed in the past year, with the index returning 14.9% due to the AI boom.

The market’s strong performance was largely driven by a few concentrated holdings, with the Roundhill Magnificent Seven ETF surging 36.6%, while equal-weighted S&P 500 trackers gained only 4.5%.

Despite recent outperformance, long-term concerns about market concentration persist, prompting advice for investors to consider adding equal-weighted funds to their portfolios for diversification, especially when making new investments.

The Story So Far

Goldman Sachs analysts predicted slow S&P 500 returns for the next decade from October 2024, citing high valuations and market concentration as primary concerns; however, the index has since significantly outperformed their short-term expectations, largely driven by the artificial intelligence (AI) boom which has further intensified market concentration in a few dominant companies, prompting ongoing discussion about the sustainability of current market dynamics and alternative investment strategies.

Why This Matters

Despite the S&P 500’s recent outperformance against Goldman Sachs’ short-term expectations, concerns about long-term market concentration and high valuations, largely driven by the AI boom, remain. This suggests that investors might consider diversifying their portfolios by incorporating equal-weighted funds alongside traditional cap-weighted funds, a strategy that could help mitigate risks should the current AI-driven hypergrowth narrative shift.

Who Thinks What?

Goldman Sachs analysts predict slow S&P 500 returns over the next decade due to high valuations and market concentration, suggesting investors consider equal-weighted funds.

The market, driven by the artificial intelligence boom, has significantly outperformed Goldman’s short-term expectations, with cap-weighted indices and key large companies showing strong gains.

The article’s author largely concurs with Goldman’s long-term concerns about market concentration and has begun adjusting their personal portfolio to include equal-weighted funds, advising investors adding new money to consider incorporating them.

Goldman Sachs analysts, who predicted slow S&P 500 returns for the next decade in October 2024 due to high valuations and market concentration, have observed the index significantly outperform their short-term expectations over the past year. Since the forecast, the S&P 500 has posted a total return of 14.9% by October 14, 2025, a figure substantially higher than the firm’s projected long-term average of approximately 3%.

Market Performance Since Forecast

The Goldman Sachs forecast was rooted in concerns over historically lofty stock valuations and the increasingly concentrated holdings within market-cap-weighted market indices. The firm suggested that investors consider equal-weighted funds as an alternative to standard index trackers like the SPDR S&P 500 Trust and Vanguard S&P 500 ETF, citing the Invesco S&P 500 Equal Weight ETF as an example.

However, the market has not reversed course in the past year. During the 51 weeks following Goldman’s report, an equal-weighted S&P 500 tracker gained 4.5%, while the Roundhill Magnificent Seven ETF experienced a 36.6% surge. This strong performance was largely driven by the continued artificial intelligence (AI) boom, with companies like Nvidia reaching a market capitalization of $4.37 trillion, making it the most valuable company globally.

Long-Term Outlook and Investor Strategy

Despite the recent outperformance, Goldman Sachs’ prediction holds a 10-year horizon, making it premature to definitively assess its accuracy. The article’s author largely concurs with Goldman’s long-term assumptions, highlighting the unprecedented AI boom as a key driver of current market dynamics where a few large companies exert significant influence.

The author suggests that this market concentration might not be sustainable indefinitely. In response to these concerns, the author has begun adjusting their personal portfolio to include positions in equal-weighted funds, while still maintaining significant holdings in cap-weighted funds like the Vanguard S&P 500 ETF. Preliminary observations from a recent market dip indicated a slightly smaller decline in the equal-weighted fund.

Key Takeaways for Investors

Both cap-weighted and equal-weighted S&P 500 funds are considered viable options for long-term investors. However, given current market conditions and the potential for shifts in the AI-driven hypergrowth narrative, investors adding new money to the market may consider incorporating equal-weighted shares to prepare for a variety of long-term market trends.