Goldman Sachs’ Ten-year Investment Outlook: Artificial Intelligence and Emerging Markets As Core Growth Engines

Goldman Sachs Group asserts that artificial intelligence and emerging markets will define the coming decade. The investment bank’s Goldman Sachs Ten-Year Global Outlook, released last Wednesday, systematically sets out expectations through 2035 and is intended to complement its economists’ forecasts.

“While cyclical forces will influence markets at times, the dominant drivers over this period should be structural: trend nominal growth, profitability and margin dynamics, starting valuations, and the policy backdrop,” analysts noted. Using a common framework adapted to local conditions, the model derives total returns from earnings growth, valuation shifts, and dividend yields, with assumptions tailored to each market’s drivers and index composition.

AI has emerged as the defining theme this year, and emerging markets have drawn investor attention amid supply-chain volatility, tariffs, and currency swings, prompting more diversified portfolios. Goldman Sachs expects these trends to persist. “Historically, U.S. dollar weakness has tended to coincide with stronger non-U.S. market performance, creating added opportunities for globally diversified allocations,” they added.

Despite AI bubble debates, equities’ long-term outlook remains resilient. Goldman Sachs maintains a constructive view on the path of global equities despite ongoing discussion of an AI bubble. “We expect robust long-term returns from global equities, even with elevated valuations,” the report states. The bank projects a 7.7% annualized return for global stocks, a figure “close to the historical median.”

Starting valuations are around 19 times forward earnings, and the report assumes they “moderate slightly” over the decade. Nominal growth, profitability, and shareholder distributions underpin market durability.

Classic bubbles feature a disconnect between valuation and fundamentals, a dynamic some managers and analysts see in AI-linked names. Conversely, strong earnings seasons have alleviated part of those concerns and propelled technology shares.

“Earnings growth remains the key driver. We anticipate global earnings (including buybacks) to compound at about 6% annually. Dividends account for the balance of returns, while valuations are expected to ease modestly from current highs,” the analysts wrote.

Emerging markets set to outperform the United States: Emerging markets are expected to command attention over the next decade, outperforming regions including the U.S. and becoming a primary engine of returns.

Goldman Sachs forecasts 10.9% annualized returns for emerging markets, supported by robust EPS growth in China and India. Asia ex‑Japan follows with a 10.3% expected return, driven by earnings and dividend yield. The Nikkei 225 has risen 27.4% year-to-date, and Japan’s expected return stands at 8.2%.

Elsewhere, Europe’s growth of 7.1% is likely to be powered by earnings and shareholder distributions. The U.S. posts the smallest expected increase at 6.5%, “entirely driven by earnings and modest dividends,” according to the analysts.

“Diversification beyond the U.S., with a tilt toward emerging markets, is advisable. Higher nominal GDP growth and structural reform should favor emerging markets, and the long-run benefits of AI ought to be broadly shared, not confined to U.S. technology,” they added.

While investor opinions diverge on AI’s impact across emerging markets, Goldman Sachs expects widespread benefits—McKinsey estimates AI’s eventual value at USD 4.4 trillion. The report notes heavy investment in AI capex and applications across South Korea, Japan, and China, while acknowledging “significant differences” by country and region.

India may deliver the highest growth, with strong fundamentals and a demographic dividend driving a 13% compound annual rate. For South Korea, with expected EPS compounding at 10%, “earnings growth may be supported by AI capex, shareholder reforms, and strategic sectors including defense, nuclear energy, and shipbuilding.”

“China has the capacity to achieve 12% growth over the next three years, driven by AI-related capex and applications, increased external market share tied to globalization, and efforts to curb excess capacity to relieve margin pressure,” the analysts concluded.