AI Stocks Poised for Comeback as Tech Giants Surpass Earnings Expectations
1min read Goldman Sachs analysts note that recent earnings reports from major tech companies involved in the AI sector were better than expected, indicating an opportunity for investors to re-enter this segment following a recent pullback.
The AI sector, which has driven market rallies over the past two years, has been sluggish since entering 2025. In January, the emergence of DeepSeek prompted skepticism around the necessity of U.S. companies investing billions in AI systems, leading to declines in AI-related stocks and chip manufacturers. Additionally, concerns over U.S. economic growth have arisen due to trade tensions initiated by former President Trump.
However, recent earnings reports from tech giants like alphabet (GOOGL.US), microsoft (MSFT.US), and meta (META.US) have alleviated market concerns. Alphabet’s financial statement showed robust profit margins despite worries over AI expenditure, while Microsoft's results reflected strong execution and continued demand amid uncertain economic conditions.
Louis Miller, a leading analyst at goldman sachs, suggested in a report that current market sentiment towards AI themes is overly pessimistic. According to Miller, this presents an opportune moment to acquire stocks in the AI sector at reduced valuations.
Miller highlighted that AI-themed equities are currently undervalued compared to levels seen earlier in the year and last year’s peak during the AI boom. These valuations are approaching figures seen before ChatGPT's debut, except for software stocks, which are more rate-sensitive. He concluded that combining the performance and earnings potential within their 'broad AI stock basket' indicates these stocks remain attractively priced, with stable earnings.
Goldman's U.S. TMT AI basket includes companies committed to developing AI or advancing new technologies. Last summer, stocks in this basket underperformed the broader market by 19% due to return concerns but rebounded by January. Since early 2025, these stocks have fallen over 20% influenced by DeepSeek and trade tensions, although some losses have been regained in the past weeks.
Additionally, Goldman Sachs’ report highlights an improvement in overall market sentiment, with risk factors related to tariffs gradually being absorbed. Analysts anticipate that economic data in the coming month will show minimal impact from tariffs, expecting U.S. consumers to maintain spending unless there is a sharp rise in prices or unemployment—neither of which are foreseen shortly.
