Goldman Sachs equity strategists indicate that as global technology stock valuations have fallen below those of the MSCI World Index benchmark, the tech sector is becoming increasingly attractive to investors. The firm has recently shifted its overall stance on equity market trends from cautious to bullish. A liquidity research report released by Goldman Sachs on Monday revealed that the dominant systematic selling pressure is diminishing. Over the next month, "fast money" funds, particularly those employing CTA strategies, are likely to switch from passive reduction to net buying. This suggests the mechanical selling that previously suppressed the market is gradually turning into a tailwind supporting a rebound.
In a research report dated Tuesday, a team of Goldman Sachs strategists led by Peter Oppenheimer noted that the technology sector, which had seen significant gains in recent years and reached near-record high valuations, has recently underperformed due to the latest Middle East geopolitical storm. However, following this valuation decline triggered by geopolitical conflict, the sector is beginning to present highly attractive long-term investment opportunities. Oppenheimer and his team wrote that, relative to consensus earnings growth expectations, tech valuations have fallen below those of the global equity market overall.
At the start of the week, a report from Goldman Sachs' trading desk highlighted that "one of the most important marginal changes in the market is evolving favorably for bulls." The bullish logic from Oppenheimer's team is based on valuation and medium-to-long-term allocation, emphasizing that global tech stocks have become cheaper and more attractive relative to their growth prospects after the pullback. The systematic funds research, conversely, presents a shorter-term, tactical bullish view, suggesting that if the rebound continues, "fast money" strategies like CTA and volatility-targeting funds could further chase the rally, amplifying the upward momentum. Thus, the former resembles the view of a Wall Street "asset allocation committee," while the latter reflects the latest perspective from a "tactical trading desk."
Within the tech sector, stocks directly tied to AI computing infrastructure—namely the "AI Compute Supergroup" led by Nvidia, Taiwan Semiconductor Manufacturing Company, AMD, and Broadcom—are typically the most sensitive, quickest to move, and exhibit the largest gains during broader market and tech sector rebounds. The core logic is exceptionally robust: this segment is directly linked to tech giants' record-breaking AI capital expenditures, not merely speculative narratives. According to the latest compiled analyst estimates, Amazon, Alphabet (Google's parent), Meta Platforms (Facebook's parent), Oracle, and Microsoft are projected to have cumulative AI-related capital expenditures reaching approximately $650 billion by 2026, with some analysts forecasting total spending could exceed $700 billion—implying a year-over-year AI capex growth rate potentially over 70%.
Global technology stocks are brewing a new upward trend. Goldman's trading desk observes significant signs of a buying inflection point in short-term "fast money" flows like CTA strategies. From a medium-to-long-term asset allocation perspective, Oppenheimer's team believes tech stocks already possess substantial valuation appeal. Their latest report also suggests that any lasting economic shock from conflict in the Middle East could be a long-term positive for the sector, as tech industry cash flows are less sensitive to economic growth. The analysts emphasize that with valuations below the broader market, the tech sector is becoming increasingly attractive to investors.
In October of last year, shares of popular global tech companies hit record highs in both price and valuation, driven by rapid revenue and profit growth from an unprecedented wave of AI data center construction, massive fund inflows, and dominant positions in cutting-edge AI technology. Since then, tech stocks have retreated from their peaks due to market concerns over rapidly膨胀ing AI expenditures with uncertain revenue trajectories—hyperscale cloud companies have committed to spending $650 billion, potentially over $700 billion, on data centers—and a rotation into cyclical sectors with less stretched valuations.
As the data shows, global tech stocks have underperformed for at least the past six months, with concerns over massive capital expenditure and sector rotation trends driving the relative decline in tech valuations and prices. Note: Data is normalized, with percentage gains benchmarked to October 7, 2025.
Veteran Wall Street analyst Ed Yardeni and another financial giant, Wells Fargo, also support Goldman's bullish view that the tech sector has gradually moved from being a "crowded trade with high valuations" back to a range with "medium-to-long-term allocation appeal." Senior strategist Ed Yardeni emphasized that while tech stocks may still be suppressed short-term by sentiment and geopolitical disturbances, from the perspective of earnings resilience, valuation digestion, and the long-term penetration logic of AI, long-term capital is facing a more cost-effective window for positioning.
Statistical data shows that negative catalysts concerning AI's disruptive impact on software business models, combined with the effects of Middle East conflict, have led the S&P 500 Information Technology sector to fall 13% since its record high last October. During this period, earnings expectations for the sector have accelerated, bringing its price-to-earnings ratio to 20.6x, roughly in line with the S&P 500's multiple of 19.6x.
Goldman's senior strategist Oppenheimer noted that investors are concerned about the potential long-term returns from such massive investments and also worry about the disruptive impact of cutting-edge AI technologies on existing SaaS business models. He stated that the reliance on expanding AI compute infrastructure also implies that future global economic growth is increasingly dependent on real-world physical compute assets. As investors widely anticipate a significant increase in infrastructure spending for power supply and support of hyperscale AI data center compute and power chains, "old economy" stocks with substantial physical assets are being repriced. A basket of capital-intensive "HALO" stocks compiled by Goldman Sachs—including almost all utilities and heavy asset manufacturing companies—has risen 11% year-to-date. The "HALO effect" described by Goldman recently refers not to the psychological halo effect, but to companies whose value stems from hard-to-replicate, long-lived physical assets/core equipment, production capacity, manufacturing networks, or infrastructure, making them less susceptible to rapid AI replacement or "technological obsolescence" and thus potentially receiving a "safe-haven premium" during rising AI anxiety.
"These factors have opened a window of opportunity in the technology sector, where growth remains strong but valuations are now significantly depressed," Oppenheimer and his team stated. Oppenheimer added that global tech stocks have continued to deliver robust earnings, seen positive earnings estimate revisions, and maintained high returns on equity.
The strongest valuation recovery play emerging from the conflict-driven selloff is the "AI Compute Supergroup" led by Nvidia. Wall Street firm Oppenheimer recently stated in a report that Nvidia, Broadcom, Monolithic Power Systems, and Marvell Technology remain its top picks in the global semiconductor sector. The firm cites the logic of an oversold bounce based on "earnings certainty + high beta attributes," alongside continuously expanding global AI expenditure as the core basis for its long-term bullish view on these preferred semiconductor stocks.
Recently, several Wall Street veteran analysts, including strategists at Oppenheimer, suggested that when global equity markets enter an oversold rebound window or if clear signals of easing Middle East geopolitical tensions emerge, the chip sector—closely linked to AI compute infrastructure, which has historically outperformed and is largely considered mispriced—will likely be one of the core forces leading the market rebound and valuation recovery. It could even be the primary engine for a significant bounce in the Nasdaq 100 Index, often seen as a barometer for tech stocks.
The "AI compute supply chain" segment has been the most sensitive, quickest to react, and most explosive during market rebounds in recent years—a trend vividly demonstrated in the risk asset rebounds around March 16 and March 31. This means that in a "risk-appetite recovery rebound" scenario, tech stocks closely tied to AI compute infrastructure are highly likely to be among the market's core offensive, bullish directions.
This potential trend also implies that sub-sectors with high earnings visibility and strong ties to record AI capex orders—such as AI GPU/ASIC, OCS switches and optical interconnects, optical modules/silicon photonics, HBM/memory, 2.5D/3D advanced packaging, and data center power chains—have the highest profit elasticity to changes in AI capital expenditure. They are also the most likely to see funds flow back first when risk appetite improves. As model scale, inference chains, and multimodal/agentic AI workloads drive exponential expansion in compute resource consumption, tech giants' capital expenditure focus increasingly concentrates on AI compute infrastructure amidst surging demand. Global investors continue to anchor the "AI bull narrative," centered on Nvidia, Google's TPU clusters, and AMD's product iterations and AI cluster delivery expectations, as one of the most certain growth investment themes in global equity markets. This also means investment themes closely related to AI training/inference, such as power, liquid cooling systems, and optical interconnect supply chains, will remain among the hottest in the stock market, following AI compute leaders like Nvidia, AMD, Broadcom, TSMC, and Micron, even amid Middle East geopolitical uncertainty.
According to the latest compiled analyst estimates, Amazon, Alphabet, Meta Platforms, Oracle, and Microsoft are projected to have cumulative AI-related capital expenditures reaching approximately $650 billion by 2026, with some analysts forecasting total spending could exceed $700 billion—implying a year-over-year AI capex growth rate potentially over 70%. Notably, these five US tech super giants are expected to cumulatively invest about $1.5 trillion between 2023 and 2026 to build immense AI compute infrastructure; by comparison, their total cumulative investment prior to 2022 was approximately $600 billion.
Comments