Goldman Sachs CEO, The Debt Dilemma, and Open A-Spy? 10/14/26

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Kelly Evans (0:55)

You're listening to The Exchange. Here's today's show.

Yes, rate-sensitive tech stocks are falling after this morning's hot CPI data. I'm Kelly Evans and welcome to The Exchange. CoreWeave and Nebius are leading the Nasdaq to the downside today. The Nasdaq down one and a half percent. Russell's worse, by the way, often is when rates are going up. But the highly leveraged AI infrastructure names are under pressure after hot CPI data pushed up treasury yields and investors questioned the strength of their balance sheets. Financials, as you can see, they're also under some pressure, though off earlier lows. Bank of America down five percent. Right now, it was eight percent earlier. State Street down six percent. Their warning about rising expenses, by the way, could have a technology aspect to that. We're going to hear directly from Goldman CEO, David Solomon momentarily.

Plus, oil prices are inching higher again amid reports that oil shipments from the Strait of Hormuz are slowing and diesel prices remain stuck around 630 a gallon. As energy expert Tom Closa warns that heating oil could be hitting new highs next, and at the worst possible time, he'll join us later this hour. But let's begin with one of the standout bank names so far this earnings season, increasingly so as we see the raft of results today. Goldman Sachs, yes, it's down two percent in sympathy with other financials, but they reported their second highest quarterly revenue ever yesterday. Earnings per share were two dollars higher than the highest Wall Street estimates, equities trading, investment banking, wealth management, all posting big year-on-year gains. Joining us now to weigh in on that, on what's happening with AI financing perhaps, inflation and so much else. Goldman Sachs CEO David Solomon and amid Kate, some speculation about his potential replacement, by the way. He's out at Goldman's Innovators Conference in San Francisco with that lady right there, Kate Rooney. Kate, over to you.

Kate Rooney (2:43)

Kelly, thank you so much. We are here with David Solomon. It's great to see you in person. Thanks for having us. We're at the Builders and Innovators Summit. You were just saying 15 years now. Is this the 15th year?

David Solomon (2:53)

Well, first of all, Kate, thanks for being here. And this is a pretty great spot. It's a nice place for you and I to have a day to be here and do this. But a little more than 15 years ago, we created this conference. The idea was to bring together really interesting entrepreneurs that were really doing fascinating things, building interesting companies. We go back 15 years and I think about Travis Kalanick from Uber.

I think about Dropbox. I think about Matthew Prince from CloudFair, Drew Houston from Dropbox. I mean, these were some of the early entrepreneurs. They built great big companies. And here's another class of 150 that are coming today. And some of these will be companies 10 years, 15 years from now we'll talk about. So it's been a fascinating place to see innovation and kind of the real engine of the US economy and US innovation.

Kate Rooney (3:39)

We want to get your take on the pipeline. It's a great setup. But Kelly mentioned earnings. You guys are coming off of one of your strongest earnings reports in the firm's history. I wonder about durability though. We talked on the analyst call about volatility, helping you guys this tech super cycle as you described it. What is the earnings engine going forward for Goldman? If things start to change or rates really start to take a bite here.

David Solomon (4:02)

I think one of the things that's missed in the narrative of day to day kind of reporting and trading, we've been working for eight years to really grow our franchise and increase the durability of our revenues and the diversity of our business. When we started eight years ago, we had a little less than $5 billion of management fees in our asset and wealth management business, and we had $3.6 billion this quarter. We're on a run rate of $15 billion of management fees. We have built now a firm where 45 percent of the revenues are considered durable recurring revenues. Now, of course, when you look at IPOs, when you look at M&A activity, there's a little bit more cyclicality around those activities. But go look at M&A revenues for the last 15 years. Every year there's M&A revenue, some years more than others. So we have a big, durable, diverse business in global banking and markets and asset and wealth management. And what we've done strategically as a firm is we've significantly lifted the floor of our business, both in terms of the revenue base and also the returns. And I think investors are seeing that and rewarding that. We feel very good about it. I can't tell you what's going to happen in the next three months, six months. I actually look out. I see some very big equity deals coming. I see some potentially very big IPOs coming. I look at our M&A backlog. We said on the call yesterday, our backlog is still at very, very robust levels. And so I feel very good about revenue accruals we have coming in M&A. And I also see the strategic activity and dialogues that are going on. And I feel pretty good about it. Counter to that, we saw a slightly hot inflation print today.