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David Solomon, Goldman Sachs’ chief executive, recently articulated that apprehensions surrounding private credit ought to impress upon investors that “the credit cycle persists,” thereby emphasizing the caution prevalent on Wall Street concerning alternative lending.
Following the 2008 financial crisis, a remarkably extended phase of affordable borrowing accompanied by minimal default rates transpired.
However, increasing apprehension suggests a potential shift in the credit cycle, attributed to the substantial involvement of the private credit sector with technology firms whose operations could be impacted by artificial intelligence.
Solomon, in his yearly correspondence to shareholders, conveyed that the investment banking firm anticipated a “favorable operational climate” in 2026, yet he warned that “it is not challenging to conceive of circumstances where perils grow considerably more apparent.”
Solomon penned, “For instance, recent weeks have seen apprehension regarding private credit, encompassing underwriting standards or the involvement with software enterprises potentially negatively influenced by AI, serving as a caution that the credit cycle remains intact.”
He added, “Increased market fluctuations across diverse volatile assets, heightened geopolitical instability, and amplified capital allocation, particularly towards AI, necessitate meticulous risk oversight.”
These observations follow JPMorgan Chase, a competitor, curtailing its financing to private credit entities amid rising worries about the creditworthiness of companies within their holdings.
Notwithstanding apprehensions regarding private markets and the US-Israeli military actions in Iran driving oil prices upward, Solomon indicated that Goldman continued to perceive “the prospect of a more advantageous operational landscape” for transactions in 2026.
He highlighted governmental incentives in developed nations, a more relaxed monetary approach, expenditures on AI infrastructure, and reduced regulatory scrutiny in the US.
Solomon concluded, “Collectively, these represent potent drivers for individuals who possess, trade, and allocate capital into risk-bearing assets.”