Goldman Sachs President on M&A, IPO market, and AI (with Francine Lacqua)

M&A is thriving; SpaceX IPO is the biggest ever; Goldman Sachs has a leading role.

Francine Lacqua

John Waldron

M&A market is doing exceptionally well, approaching a record year with $2.5 trillion in volume; Goldman Sachs has a $300 billion lead in league tables.

The record year was 2021 with $4.6 trillion of volume.

Focus on SpaceX first trading day.

Francine Lacqua

John Waldron

SpaceX IPO is a $75 billion IPO, the largest in history, presaging a wave of IPOs and showing capital markets' willingness to finance AI infrastructure.

Global IPO volume could approach $250-300 billion for the year, but as a percentage of global market cap it's only 14-15 basis points, not historically large.

Goldman Sachs helped Alphabet and SpaceX raise nearly $200 billion.

Francine Lacqua

John Waldron

Capital markets are demonstrating willingness to finance extraordinary companies for AI infrastructure build.

Proud of the team across technology, equity, and debt capital markets franchises.

Concerns about smooth trading day for SpaceX, referencing Facebook IPO 2012.

Francine Lacqua

John Waldron

A lot of preparation has been put in place for a good trading day.

Options for retail investors on SpaceX.

Francine Lacqua

John Waldron

Plenty of options for retail investors.

Concern about exuberance in equity markets given AI, Middle East, and inflation.

Francine Lacqua

John Waldron

Global equity market cap is about $150 trillion, over half in US. S&P multiples around 21-22x, but on cap-weighted basis 17x, not extraordinary. Earnings growth is strong (Q1 28%), so valuations are not being driven higher on a weak base.

The bigger question is how returns on capital invested in AI infrastructure will transpire across the enterprise landscape.

Do mega IPOs crowd out smaller IPOs?

Francine Lacqua

John Waldron

There is a risk of crowding out for companies not in the AI slipstream. Expect a shift from infrastructure build to deployment and application phase, which will level things out.

Token costs are getting expensive, sometimes exceeding annual salaries.

Francine Lacqua

John Waldron

Enterprises are in an experimentation phase, not micromanaging ROI on every token. This will change over time as behavior becomes more discerning.

Goldman Sachs is focused on four vectors: literacy/adoption, software development lifecycle, process reengineering, and client tooling.

Does AI kill or affect jobs?

Francine Lacqua

John Waldron

Unclear if there will be significant job losses. The labor market is dynamic, and this may be like other innovations that create more jobs over time with increased productivity.

What is your take on Europe?

Francine Lacqua

John Waldron

Too much pessimism about Europe. There is great innovation and intellect. The biggest issue is risk capital; Europe needs to generate more and operate as a single market.

The promise of Europe as a single market equivalent to US and China hasn't come to fruition.

What do CEOs need?

Francine Lacqua

John Waldron

Less regulation, less bureaucracy, more ability to tap into markets in a unified fashion, and more risk capital.

Appetite for big M&A at Goldman Sachs?

Francine Lacqua

John Waldron

Goldman Sachs has done three transactions (Innovator ETF platform, Industry Ventures, T. Rowe Price partnership) that add to product/solutions and distribution capabilities. They want to do more of these, but they are not large transactions ($1-2 billion each).

What looks unhealthy in the US economy?

Francine Lacqua

John Waldron

Employment is strong and tight. AI infrastructure build is a significant stimulus. US consumers continue to spend. Household wealth is at an all-time high ($180 trillion, over 8x income). Inflation is fairly healthy. Expect more nominal growth and probably more inflation for some time.

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