By Andrew Bary
Goldman Sachs CEO David Solomon said last week that "we are definitely in a moment where there is more greed than fear."
There is a prime example close to home. Goldman stock has surged more than 80% in the past year to a recent $1,092 as investors seek exposure to the artificial-intelligence and technology boom beyond direct plays such as Nvidia.
Goldman has been the go-to investment bank for the tech industry. It is playing the lead role in SpaceX's $75 billion initial public offering in the coming week and was involved in Alphabet's $45 billion of equity offering last week.
Goldman shares are leaving rivals like JPMorgan Chase and Bank of America in the dust -- their stocks are up about 20% in the past year. Goldman shares have tripled over the past 2 1/2 years and are tracking tech exchange-traded funds more so than financial stocks.
While the fundamental outlook at Goldman looks as good as ever, the stock already reflects that -- and then some. The shares look pricey relative to peers based on key metrics like price/book ratio and earnings.
Goldman is valued at three times book value, near its high over the past 20 years, and for over three times tangible book value, a conservative measure of shareholder equity.
Barron's wrote favorably on Goldman in 2023 when it traded at book value, and in 2020, when the stock languished around $200. We still like the company, but we no longer like the stock.
Goldman shares fetch 18 times projected 2026 earnings, in line with Morgan Stanley, another tech banking winner, and a premium to JPMorgan and Bank of America at 12 to 13 times.
For all the excitement about Goldman's investment banking franchise, that unit generates only about 15% of the firm's revenue. Trading and markets accounts for about 50%, while Goldman's wealth and asset-management unit chips in the rest.
One issue for investors is that Goldman's trading business, while more durable in recent years, is less transparent than other parts of the firm and earnings are tougher to predict. Goldman is more exposed to trading and market-oriented revenue than its peers. Investors historically have accorded trading profits a lower multiple than other brokerage and banking businesses.
That isn't happening with Goldman right now. Its market capitalization of $335 billion is approaching the $384 billion of Bank of America, which has about 50% more earnings.
Bank of America also has a big investment bank and a broader franchise than Goldman, including the country's No. 1 consumer bank and the No. 2 wealth management platform in Merrill.
Bank of America and JPMorgan shares look like better bets than Goldman and Morgan Stanley at current prices.
UBS analyst Erika Najarian wrote recently that she's "befuddled" by the underperformance of JPMorgan stock relative to Goldman and Morgan Stanley, given JPMorgan's exposure to similar banking and capital markets trends.
What could change bullish sentiment on Goldman? A market pullback -- the shares traded at $800 in March amid concerns about AI and soaring energy prices. And if the SpaceX IPO disappoints, it could dampen investor enthusiasm for tech deals and Goldman stock.
Goldman stock has risen so much that it trades above the average price target of $980 of Wall Street analysts. Most rate it a Hold.
The bull case for Goldman is that it is the purest Wall Street play on the tech capital-raising boom along with Morgan Stanley -- whose stock has roughly matched Goldman's over the past year.
"Goldman is riding the bull-market wave and what is truly a supercycle for equity capital markets and advisory work," says Gerard Cassidy, the banking and brokerage analyst at RBC Capital Markets. He has a Sector Perform rating and price target of $1,030 a share.
Najarian of UBS thinks there could be more room for Goldman stock to run as the tech boom continues. In a recent note, she wrote of Morgan Stanley and Goldman stocks: "Better not to stand in the way" as a "valuation-driven short case" may not hold up.
Goldman is coming off its second-best quarterly result ever in the first three months of this year. Goldman's investment banking fees jumped nearly 50% the first quarter, and that is before all the big deals in the current quarter.
Analysts see earnings rising more than 15% this year to about $60 a share.
Goldman is at the center of satisfying the enormous financing needs of the tech sector. There are coming IPOs from Anthropic -- in which Goldman reportedly is playing a lead role -- and OpenAI, plus the global data-center buildout.
AI spending needs are so great that Alphabet raised new equity for the first time in more than 20 years. Meta Platforms and Amazon.com, also with huge capital spending plans, could be next, and if so, expect Goldman to be in the mix.
Goldman executives are bullish.
They cite the banking boom, strength in trading, and growth in the firm's alternative-asset platform and a strong position in ultrahigh-net-worth wealth management.
"We're top three in essentially all major verticals that you would care about in banking and markets franchise," Goldman President John Waldron said at a recent Bernstein investor conference. He said the firm's goal is to "accelerate our earnings power" and "raise the floor on our return."
In a recent podcast, CEO Solomon said: "Fundamentally, the firm is bigger, broader, more diverse, and more durable. And we're on a super course for more earnings growth and more performance for our shareholders over the next five years."
Asked by an analyst about the "fairly rich valuation" on the stock, Waldron replied: "Rich valuation is in the eye of the beholder." So far, Waldron has been right, but that could change quickly given the stock's stretched valuation.
Write to Andrew Bary at andrew.bary@barrons.com
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(END) Dow Jones Newswires
June 06, 2026 16:40 ET (20:40 GMT)
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