Goldman Sachs MD Warns: AI Trading is ’Extremely Nonlinear and Wildly Volatile’
Wall Street's AI obsession hits reality check—Goldman managing director drops truth bomb on algorithmic chaos.
The Nonlinear Nightmare
Forget smooth sailing—AI-driven markets swing like a pendulum on espresso. One minute you're riding high; the next, algorithms dump your portfolio into oblivion. No pattern, no predictability—just pure digital madness.
Volatility Isn't a Bug, It's a Feature
These systems don't just react—they amplify. Market tremors become quakes as machines feed on each other's signals. Human traders? Basically spectators watching their screens flash red.
Goldman's Warning Shot
Translation: even the pros can't tame this beast. When AI trades, it doesn't care about your stop-losses or risk models—it's a runaway train with a calculus PhD.
So next time your fintech broker promises 'AI-powered gains,' remember: sometimes the algo gets drunk and sells your Bitcoin at a 40% discount. Just another day in finance—where artificial intelligence meets very real losses.
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The first phase of AI focused on infrastructure, explained Sheridan, which led to solid gains for Nvidia (NVDA) and Broadcom (AVGO). Moving forward, AI will drift toward the “application layer,” which centers on how companies will use AI to operate more efficiently.
Challenges Loom for Companies Adopting AI
Sheridan says that this could create issues, as “Enterprises have to operate within strict budget requirements. You also run into some friction on the employee side with respect to how they use AI in their own individual workflows.” In contrast, consumers are more likely to adopt AI tools because they aren’t subject to as many restraints.
Whether AI can result in sustainable earnings growth is still up in the air, although Sheridan noted that companies like Meta Platforms (META) have already experienced an uptick in engagement from AI-powered algorithms.
