Getty Images
- The economy is at the edge of a new "super cycle," underpinned by AI and decarbonization, a Goldman Sachs analyst said.
- It marks a change from the drivers of the last supercycle that began in the 1980s.
- The AI boom has momentum, and its spillover effects will improve productivity, spurring a new period of growth.
The global economy is shifting into a new era of growth, driven by the artificial intelligence boom and decarbonization.
Four decades ago, the global economy embarked on the current super cycle, when interest rates and inflation peaked and paved the way for a period of gargantuan growth dubbed the "long boom."
And it's about time for another cycle to kick off, according to one analyst.
"I think we are moving clearly into a different super cycle, one in which some of those factors can no longer be relied on in the same way," Peter Oppenheimer, a Goldman Sachs analyst, told CNBC's "Squawk Box Europe" on Monday.
The current economic super cycle, or period of rapid expansion, began in the 1980s, Oppenheimer explained, when the cost of borrowing peaked, followed by almost 35 years of low interest rates. The end of the Cold War, meanwhile, dispelled a host of geopolitical risks, while several industries were deregulated, from airlines to banking. Finally, there was globalization, which rewired international trade and finance.
As the global economy gets set for a new wave of growth, the factors underpinning a new super cycle won't come from the same places, Oppenheimer said. Interest rates are not in an aggressive decline. Globalization has received a lot of flak. Geopolitical risks are on the rise.
"While those things should leave a lower pace of returns across financial assets relative to those in the last decade or so, there are some other significant drivers which could be very positive," he said."The combination of AI and its impact on productivity, but also decarbonization."
The AI boom helped tech companies rule the market last year, with firms like Nvidia and Meta notching triple-digit gains in their stock price. While the sector has stumbled to start 2024, Wall Street is optimistic about where AI will lead markets, especially as the technology begins to bleed into all sectors of the economy.
Oppenheimer also said that those tech companies at the "epicenter" of the boom look relatively cheap compared to the tech giants in the Nifty Fifty bubble in the early 70s or the Japanese tech bubble in the late 1980s.
"They're already much more profitable," he added. "So I think this is a story that can run and have quite a big impact for some time to come."
The decarbonization narrative is the other side of the coming global growth cycle. Oppenheimer has noted that developments in tech will only take us so far as the physical demands of our world change. As the climate warms, economies are being pushed to restructure and modernize — a shift that usually ushers in a phase of economic growth.