Top Goldman Sachs Stock Researcher Warns AI Bubble May Be About to Explode

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The head of stock research at Goldman Sachs, Jim Covello, believes that the burgeoning AI industry could be in for a rude awakening.

As the New York Times reports, Covello closely followed the crash of the dot-com bubble shortly after he started working at Goldman, watching as thousands of workers were laid off.

Covello’s Stark Warning

In June 2026, he issued a stark warning in a widely reported research paper, arguing that the billions of dollars being poured into AI companies may not deliver sufficient returns and that the current generation of AI tools simply isn’t advanced enough to drive meaningful productivity gains.

“Despite its expensive price tag, the technology is nowhere near where it needs to be in order to be useful,” Covello wrote in the report. “Overbuilding things the world doesn’t have use for, or is not ready for, typically ends badly.”

The paper marked a significant turning point, prompting a number of venture capitalists to grow wary of an emerging bubble that could be poised to burst.

In his analysis, Covello predicted that companies will eventually scale back spending once they realize that costly AI tools are eroding profits. He does not rule out the possibility of a dot-com-style crash.

“When you have a view that’s sort of out on a limb, you live in this kind of constant state of paranoia that AI is going to be as big as everybody thinks it is,” he told the NYT. “So I am genuinely on the lookout every single day for my blind spots. Where could I be wrong?”

Popping Bubbles

Covello is far from alone in warning of an impending AI bubble. In a June 2026 blog post published just days before Covello’s report, Sequoia Capital partner David Cahn argued that the entire tech industry would need to generate $600 billion per year in revenue to justify current valuations and remain viable.

While “speculative frenzies are part of technology, and so they are not something to be afraid of,” Cahn cautioned that AI is anything but a “get rich quick” scheme.

Other experts, including DoubleLine Capital billionaire CEO Jeffrey Gundlach, have drawn direct comparisons with the dot-com bubble.

“This feels a lot like 1999,” Gundlach said during an X Spaces broadcast in March 2026.

In short, investment bankers are growing cautious as major tech companies continue pouring billions into expanding costly AI infrastructure, with meaningful returns still likely years away.

“Having someone from a firm like Goldman ring the bell and say, ‘Hey, it won’t become a reality the way everyone thinks’ had people asking important questions about what was actually happening,” Goldman client and Callodine Group chief executive Jim Morrow told the NYT.

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