• David Solomon expresses little surprise at current market volatility, citing overextended AI stock valuations
  • The Goldman chief warns of potential 10-20% market drawdown within the next year
  • Other major investors are positioning defensively amid bubble-like conditions in tech sectors

Goldman Sachs Group Inc. CEO David Solomon stated he's "not surprised there is a little volatility in the market" during a CNBC interview Thursday, pointing to what he characterized as overexcitement around artificial intelligence stocks that has pushed valuations into potentially unsustainable territory.

Solomon's comments come as the S&P 500's price-to-earnings ratio sits at multi-decade highs, with the Shiller CAPE ratio flashing warning signs reminiscent of previous market bubbles. "The recent AI-driven market surge may be overextended," Solomon cautioned, specifically warning of a potential "pullback or drawdown"—typically defined as a market decline of 10-20%—within the coming year.

Market participants have been increasingly positioning for turbulence, with several major investors building substantial cash reserves. Warren Buffett's Berkshire Hathaway has been notably cautious, while flows into traditional safe havens like gold and alternative assets including Bitcoin have accelerated in recent weeks, according to people familiar with institutional positioning.

Efforts to reach Goldman Sachs for additional comment on Solomon's market outlook were unsuccessful Thursday afternoon. The bank's market-influenced businesses have benefited from the technology boom, though Solomon's warning suggests the firm sees increasing risk in current valuations.

The current environment shares characteristics with previous market peaks, including the 2000 dot-com bubble when excitement around internet technologies preceded a sharp correction. Deutsche Bank analysts recently noted parallels between current AI enthusiasm and historical periods when new technologies captured investor imagination before fundamentals could justify valuations.

Without a meaningful correction, Solomon suggested, the market risks becoming increasingly disconnected from economic realities. Other major financial firms have echoed similar cautionary notes in recent client communications, though Solomon's public comments represent one of the most direct warnings from a sitting Wall Street CEO.

Trading desks reported increased client inquiries about hedging strategies following Solomon's interview, according to people familiar with the matter. The volatility index VIX has remained elevated throughout the week as investors weigh the sustainability of the AI rally against broader economic indicators.

Correction: An earlier version of this article misstated the timing of Solomon's comments; they were made Thursday during a CNBC interview.