--- title: "AI Disrupts the Most Obscure Link: Terminal Value Volatility Is Repricing the Entire US Stock Market" type: "News" locale: "en" url: "https://longbridge.com/en/news/284381835.md" description: "Goldman Sachs points out that approximately 75% of the S&P 500's equity value now stems from \"terminal value\" (long-term earnings expectations beyond ten years), approaching highs seen during the Dotcom Bubble. For every 1 percentage point downgrade in long-term growth rates, overall valuations could shrink by 15%, with high-growth stocks facing an impact of up to 29%. Amid the AI disruption narrative, market sell-offs have concentrated in high-margin sectors such as software, reflecting essentially a repricing of long-term growth rather than a deterioration in short-term fundamentals" datetime: "2026-04-28T12:09:34.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/284381835.md) - [en](https://longbridge.com/en/news/284381835.md) - [zh-HK](https://longbridge.com/zh-HK/news/284381835.md) --- # AI Disrupts the Most Obscure Link: Terminal Value Volatility Is Repricing the Entire US Stock Market The AI disruption narrative is reshaping the pricing logic of US stocks. Goldman Sachs' latest research shows that investor concerns about artificial intelligence potentially impacting companies' long-term profitability have shifted market focus to the most difficult-to-quantify and sensitive part of stock valuation—"terminal value," which refers to long-term earnings expectations beyond ten years. According to Zhuifeng Trading Desk, Goldman Sachs estimated in a report released on April 27 that **approximately 75% of the current equity value of the S&P 500 comes from terminal value, nearing a 25-year high and echoing the optimism of the Dotcom Bubble era.** Goldman Sachs also calculated that for every 1 percentage point decrease in long-term growth rate assumptions, the enterprise value of S&P 500 constituents would shrink by approximately 15% overall; for high-growth stocks, this impact reaches as high as 29%. Goldman Sachs stated that debates surrounding AI disruption—and the resulting uncertainty in terminal value—are expected to persist for at least several quarters. "The threat of disruption is likely to constitute a persistent headwind until AI applications enter a more mature stage." ## Terminal Value Proportion Approaches 25-Year High, Similar to the Dotcom Bubble Era Goldman Sachs used a modified 10-year Dividend Discount Model (DDM) to calculate that approximately 75% of the S&P 500's current equity value is concentrated in the terminal value portion, i.e., the long-term value beyond the model's 10-year forecast period. This proportion is historically high, bearing a strong resemblance to the optimistic expectations during the 2000 Dotcom Bubble. In its report, Goldman Sachs pointed out that a high proportion of terminal value itself reflects the market's optimistic expectations for long-term growth, but it also means that valuations are extremely sensitive to changes in long-term growth assumptions. "Today, the proportion of terminal value in equity value is relatively high compared to historical norms, mirroring periods when other investors' long-term growth expectations became increasingly optimistic, including during the internet boom." From an industry distribution perspective, the proportion of terminal value in high-growth, high-margin industries is far higher than in low-growth industries. Goldman Sachs' calculations show that the proportion of terminal value in enterprise value for high-growth stocks is approximately 84%, about 72% for the S&P 500 overall, and about 59% for low-growth stocks. ## Software Sector Bears the Brunt as AI Competitive Pressure Spreads to Asset-Light Industries The core of the concern regarding AI disruption lies in the possibility that artificial intelligence may foster low-cost competition in industries with lower barriers to entry, thereby suppressing revenue growth and profit margins for existing enterprises. Goldman Sachs pointed out that the industries considered most vulnerable to disruption are precisely those that have experienced the fastest growth and highest profit margins in the past. The software sector is the epicenter of this round of sell-offs. According to Reuters, the S&P 500 Software & Services Index has fallen by approximately 17% year-to-date, primarily driven by concerns that new AI tools may erode future revenue growth and profit margins. The Goldman Sachs report also noted that a basket of software stocks has dropped 19% year-to-date, and selling pressure has spread to other asset-light industries. Notably, recent earnings expectations for these stocks remain robust. The sharp decline in share prices stands in stark contrast to the resilience of short-term fundamentals, highlighting that the market is repricing long-term growth prospects rather than expressing pessimism about near-term performance. ## Long-Term Growth Rate Is the Most Important Driver of Valuation, But Short-Term Volatility Is Dominated by Near-Term Expectations Goldman Sachs' empirical analysis shows that, from a cross-sectional perspective, a company's long-term growth expectation is the most important determinant of its valuation multiple. For every one standard deviation increase in the implied long-term growth rate, the corresponding forward P/E ratio rises by approximately 0.6 standard deviations (about 4 times the P/E ratio). Its importance is about three times that of near-term earnings growth, balance sheet strength, market capitalization size, and earnings stability. However, in explaining short-term valuation changes, the role of near-term growth expectations and risk premiums is more prominent. Goldman Sachs pointed out that since 1990, near-term growth expectations have explained about three times as much of the quarterly changes in valuation multiples as long-term growth expectations. This is because the volatility of long-term growth expectations is far lower than that of near-term expectations, making them relatively sluggish to change in the short term. This structural feature implies that when the AI disruption narrative truly shakes market confidence in long-term growth, its impact on valuations will be profound and difficult to reverse. ## Goldman Sachs Recommends Companies Strengthen Long-Term Communication; Accelerating Buybacks Could Signal Confidence Facing a market environment of rising terminal value uncertainty, Goldman Sachs believes corporate management should take proactive measures. The report pointed out that the importance of terminal value highlights the necessity of communicating long-term growth plans to investors, but the reality is concerning—during the most recent round of earnings conference calls, only 5% of S&P 500 constituents discussed financial metrics beyond five years, with these discussions mainly concentrated in the utilities and real estate sectors. Goldman Sachs recommends that more management teams should prioritize communication regarding long-term prospects, including total addressable market size, growth paths, and profitability outlooks, even if multi-year performance guidance itself carries uncertainty. Additionally, Goldman Sachs proposed that Accelerated Share Repurchase (ASR) programs can serve as a tool for management to convey confidence to the market. Academic research generally finds that ASR announcements often trigger positive stock price reactions, with greater magnitude than ordinary repurchase programs. 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