Exclusive: Goldman bankers say the next AI boom is in the physical economy
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The next phase of AI adoption and investment is expanding into the physical economy — factories, mines, utilities and oil rigs — Goldman Sachs says in a report exclusively shared with Axios.
Why it matters: Investor attention is still trained on frontier AI labs, but Goldman argues the next wave of deals and investment will come from deploying AI across the real economy.
Zoom in: Goldman estimates roughly $7.6 trillion will be invested globally in AI infrastructure from 2026-2031, across compute, data centers and power.
- Yet software accounts for less than 0.5% of global GDP, Goldman says, leaving "the other 99.5%" of the economy to AI's next frontier.
- "We're only just beginning" to see AI's impact on industrial businesses, Mark Sorrell, global head of industrials at Goldman Sachs, told Axios.
Between the lines: The traditional boundaries between tech and industrial companies are blurring.
- AI has made technology companies more collaborative with non-tech firms, Jung Min, Goldman's global co-head of tech, media and telecommunications told Axios.
- Sorrell said conversations with manufacturing executives have shifted from whether factories will adopt AI to how quickly automation will spread.
- Looking a decade ahead, Sorrell said many expect production lines to rely on far more robots than human workers, particularly for unsafe work.
Follow the money: AI is advancing faster than the money to deploy it can materialize, which is either a reason to be optimistic or a reason to fear a pending AI market bubble, depending on who you ask.
- But Min argued that it's "healthy" for companies to tap new sources of capital to meet AI demand from across the economy.
- "Which sectors thrive and which stall" is "a challenge of capital architecture as much as engineering," the report notes.
Threat level: The changes are creating a sense of urgency inside boardrooms.
- "There's definitely a little bit of, 'If I don't move, do I get left behind?'" Sorrell said of conversations with corporate clients.
- Tech M&A has already reached $566 billion in 2026, up from $334 billion in all of 2025, according to Dealogic data cited by Goldman.
- Geopolitical tensions haven't slowed deals in the space, Sorrell said, as global energy prices have come down.
The bottom line: AI's next chapter won't be confined to Silicon Valley. Goldman says it will increasingly be built across the physical economy.
