Goldman Highlights Diverging Forces as Tech Stocks Split on Earnings Outlooks

Market Analysis: Divergent Narratives in Tech Stocks

Goldman Sachs analysts highlighted a key divergence in stock market drivers as they pointed to contrasting narratives shaping equities in the near term. While some areas show signs of strength and optimism, others are buckling under pressure from shifting consumer behavior and evolving industry dynamics. Investors are now closely monitoring how these opposing forces will interact ahead of earnings season and key macroeconomic data releases.

Apple's App Store, a significant contributor to the company's Services revenue, saw a slowdown in spending in November, according to Goldman Sachs analyst Michael Ng according to Goldman Sachs analyst Michael Ng. Year-over-year spending rose 6% to $6.61 billion, down from the 9% growth seen in October. The decline was particularly notable in the gaming segment, which accounts for about 44% of App Store revenue and saw a year-over-year drop of 2% compared to 3% growth the prior month.

Meanwhile, semiconductor stocks like Micron Technology have seen a more bullish narrative unfold. Goldman Sachs raised its price target for Micron to $205 from $180, citing strong pricing momentum in the DRAM and NAND markets. The firm noted that Micron's recent performance and industry dynamics support the expectation of "healthy upside to Street estimates," particularly as demand for high-bandwidth memory and AI-driven applications continues to grow.

How Markets Reacted

Apple shares rose slightly in midday trading on Tuesday, despite the firm's caution about the App Store slowdown according to Goldman Sachs analyst Michael Ng. Ng reiterated a Buy rating on the stock, emphasizing that Apple's Services business could still meet expectations, even if growth rates in the App Store have slowed. The firm cited potential support from faster growth in other service categories, including iCloud, Apple Music, and the App Store's non-gaming offerings.

Micron, on the other hand, was already trading at $239.49, well above its updated $205 price target according to Goldman Sachs. The stock's 185.38% year-to-date return reflects strong investor confidence, despite concerns that the stock might be overvalued. Goldman Sachs pointed to three key areas investors should monitor: the sustainability of DRAM pricing growth, the company's progress in high-bandwidth memory (HBM) production, and gross margin expansion.

What Analysts Are Watching

Goldman Sachs analysts are also tracking the evolving business strategies at other firms, including Vestis, which outlined a $300 million adjusted EBITDA target for 2026 according to the report. The company's CEO, Barber, emphasized confidence in the transformation plan, despite analyst skepticism about execution risks and cultural challenges. Management's tone has shifted from cautious optimism to a more assertive stance, with specific plans for cost reduction, network optimization, and strategic pricing adjustments.

C3.ai, a software company navigating leadership changes and operational challenges, is another focus of investor attention according to Goldman Sachs analysis. The company is expected to report a significant loss in its Q2 earnings, with revenue forecasts also trending downward. Goldman Sachs and other analysts have expressed concerns over execution risks and revenue concentration, noting that the firm faces a high bar to stabilize performance. Recent leadership changes and a potential sale process have further complicated the outlook.

Risks to the Outlook

Goldman Sachs analysts emphasized that Apple's App Store slowdown could have broader implications, particularly as off-app payment options gain traction according to Goldman Sachs. These alternative payment methods could disrupt the traditional App Store revenue model, potentially leading to a more fragmented ecosystem for developers and users. The firm acknowledged that Apple's Services segment is already facing elevated expectations, with Services growth projected to align with 14% year-over-year guidance.

Micron's pricing dynamics remain a key focus for investors, with Goldman Sachs highlighting that while demand for DRAM remains strong, there are risks related to oversupply and margin compression. The firm noted that while the current pricing environment supports near-term growth, long-term sustainability will depend on industry discipline and supply-demand balance.

Apple and Micron are not the only companies under scrutiny. Vestis and C3.ai both represent cases where transformation plans and strategic shifts are under intense analytical focus according to the report. For Vestis, the risk lies in executing a complex transformation plan while managing customer expectations and profitability. For C3.ai, the risk is more operational-stabilizing sales execution and managing leadership transitions without further damage to its financial outlook.

As investors weigh these divergent narratives, the broader market will be watching how earnings reports, guidance updates, and macroeconomic data shape the next phase of the equity market cycle. Goldman Sachs and other major firms will continue to monitor these dynamics closely, adjusting their outlooks as new information emerges.