Goldman Sachs Sees 20% AI Stock Basket Rebound Amid Earnings Surge
2min read Goldman Sachs analysts have noted that recent earnings reports from major technology companies involved in the artificial intelligence (AI) sector have exceeded expectations. This positive performance has bolstered investor confidence, suggesting that the recent market pullback presents a strategic opportunity for investors to reallocate their portfolios towards the AI sector. The analysts' insights underscore the resilience and growth potential of AI-driven technologies, which have been a focal point of innovation and investment in recent years.
The favorable earnings reports indicate that these companies are not only meeting but surpassing market expectations, which is a strong indicator of their financial health and future prospects. This development is particularly significant given the broader market conditions, where volatility and uncertainty have been prevalent. The analysts' recommendation to capitalize on the current market conditions by investing in AI stocks reflects a strategic approach to navigating the market landscape. By focusing on companies that have demonstrated strong performance in the AI sector, investors can position themselves to benefit from the continued growth and innovation in this field.
The analysts' advice to take advantage of the recent pullback underscores the importance of timing in investment decisions. The pullback provides a window of opportunity for investors to enter the market at more favorable valuations, potentially enhancing their returns in the long run. This strategy is particularly relevant for investors who are looking to diversify their portfolios and capitalize on the growth potential of the AI sector. The analysts' recommendation to invest in AI stocks is based on a thorough analysis of the market conditions and the performance of individual companies. By focusing on companies that have demonstrated strong earnings and growth potential, investors can position themselves to benefit from the continued innovation and development in the AI sector.
Louis Miller, leading the goldman sachs analysts, stated that the current market sentiment towards AI themes is quite pessimistic. However, this pessimism presents an opportunity for investors to buy into the AI sector at lower valuations. Miller noted that the valuations of all AI-related stocks are currently lower than at the beginning of the year and last year. From a long-term profitability perspective, various AI stocks are now more affordable, approaching levels seen before the advent of ChatGPT, except for software stocks, which are generally more sensitive to interest rates. Miller also highlighted that the performance and earnings of the 'broad AI stock basket' remain robust, indicating that these stocks are still undervalued.
Goldman Sachs' US TMT AI basket includes companies dedicated to developing AI or driving new technology implementations. Last summer, this basket underperformed the broader market by 19% due to concerns about investment returns. However, it rebounded to high levels in January. Since the beginning of 2025, the basket has declined by over 20% due to the impact of DeepSeek and the trade war initiated by the former US President. However, in the past two weeks, the basket has partially recovered some of its losses. Additionally, the overall market sentiment has improved, with tariff risk factors gradually being digested. Analysts expect that economic data over the next month will not show significant impacts from tariffs and anticipate that US consumers will continue to spend, unless prices rise sharply or unemployment rates increase, which are not expected in the short term.
