How AI Is Re-platforming the Economy, Goldman Sachs

AI’s shaking up the economy in ways we’re just starting to grasp, and Goldman Sachs has the scoop. Their report dives into how this tech is flipping the script on infrastructure software, creating big opportunities for investors and companies alike.

At a Glance

• AI’s re-platforming the economy, reshaping tech stacks and boosting infrastructure software.
• Developers are now key players, driving innovation in this AI shift.
• M&A and IPOs are heating up, with new AI cloud ecosystems emerging fast.
• Why it matters: this could birth the next big tech giant.

What’s AI Doing to Infrastructure Software?

A New Tech Game

AI’s flipping the script on how we build tech. Goldman’s Karthik Subramanian says, “AI appears to be leveling the playing field, shifting power to data and compute platforms while fundamentally transforming developers’ roles.” For years, their “4D framework” focused on data-driven apps and mobile use, but now it’s all about open platforms that ditch “walled gardens” for flexibility.

Cost Meets Value

This shift’s happening as money gets tight. Enterprises want cost-effective, value-packed solutions. Subramanian adds, “Enterprise AI could produce the next cutting-edge technology company as model innovations and new inferencing stacks proliferate.” It’s a wild time for tech evolution.

Why Infrastructure Software Is Hot Right Now

The Next Big Payoff

History’s a guide here. Goldman notes, “The last few major technology shifts have followed a similar pattern: virtually all financial gains are first captured by semiconductor and hardware companies but ‘blossom’ in the infrastructure software layer.” In the cloud era, about 60% of the Total Addressable Market value hit this layer, and AI’s doing it again.

Bridging the Gap

Infrastructure software’s the glue now. It links cutting-edge hardware to app development. With big CapEx pouring into AI chips, Goldman sees “significant opportunities for strategies, sponsors, and investors as legacy infrastructure markets get redefined and completely new ones emerge.”

Developers: The New Superstars

Architects of the Future

Developers aren’t just coders anymore. They’re designers, data scientists, and even AI agents shaping software. Usman Ashraf from Goldman says, “Winning their engagement and loyalty helps position your platform to be the foundation upon which the next generation of applications is built.” They’ve always been the entry point to enterprises and now AI.

Catalysts of Change

Every tech leap leans on developers. Ashraf adds, “During every platform shift, developers have been the catalysts of innovation, and this trend holds true today.” Platforms that empower them now will rule the enterprise software market tomorrow.

The Competitive Shake-Up

A 3D Chessboard

Everyone’s in the Game

Chip makers like NVIDIA are stacking software with CUDA libraries to lock in developers. Hyperscalers like Microsoft are crafting proprietary chips and data tools to rival Databricks. Goldman describes it as a “complex ‘3D chessboard’ where companies from vastly different backgrounds are competing for leadership in the lucrative enterprise AI market.”

M&A and IPOs: The Next Moves

Deals Driving Change

M&A’s the name of the game. Goldman predicts, “We expect many smaller AI companies to seek consolidation with larger players, corporates to cement their AI capabilities via opportunistic M&A, and financial sponsors to increase their exposure.” Big moves like AMD eyeing ZT Systems or Salesforce grabbing Own show the trend.

IPO Buzz for 2025

Liquidity’s opening up, and IPOs are next. Ashraf notes, “As liquidity taps open up alongside a healthy IPO market, we expect robust IPO activity as investors look for companies with scale, visibility into growth, and proven unit economics.” It’s a goldmine for firms with solid foundations.

Exciting New Categories

The Rise of AI Cloud

New AI cloud ecosystems are stealing the spotlight. Goldman’s excited about “neo-clouds and specialized software ecosystems designed to support enterprise-grade AI workloads.” These focus on machine learning, inference, and data security, becoming the backbone for automation and analytics.

Transformative Potential

This could spark the next tech titan. Goldman says, “These emerging categories could produce the next cutting-edge technology company as enterprise AI products and services materialize in the coming decade.” It’s early days, but the potential’s massive.

Private Equity’s Big Role

Beyond the Spotlight

Private equity’s evolving too. Sponsors are chasing growth, not just cost cuts, mirroring venture capital with a focus on metrics like the Rule of 40. Goldman notes they’re “plugging the gap left by strategics and have demonstrated their willingness to pay competitive multiples.”

Take-Privates Surge

AI’s shaking up valuations, making take-privates hot. The report highlights 2024’s record tech take-private deals, with SolarWinds’ recent move to Turn/River Capital as proof. It’s a smart play as AI disrupts traditional software moats.

Surprises in the Mix

Legacy’s Comeback

Here’s a twist. Goldman’s surprised by legacy players’ staying power. “We have been most surprised by how enduring some legacy companies have proven to be,” they write. Mainframes, once old news, are bouncing back, with Rocket Software’s OpenText deal bridging old and new tech.

Open Strategic Windows

Tech’s moving fast, but opportunities abound. Goldman sees “multiple ‘strategic windows’” reopening, letting companies reinvent or seize new chances. It’s all about spotting those turns for clients.

Conclusion

AI’s re-platforming the economy, and Goldman Sachs sees infrastructure software as the heart of it all. From developer power to M&A waves and AI cloud breakthroughs, the next big tech star might be born here.

View the full PDF from Goldman Sachs.

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