Global markets have fully recovered from the impact of conflicts, and the Goldman Sachs trading desk believes the AI theme will significantly outperform the broader market over the next 1 to 6 months, with the infrastructure layer being the highest conviction area.
According to the trading desk's latest view report from the FICC and Equities division on April 18th, a key assessment is that stock markets and major long-term themes have returned to their pre-conflict levels, but with higher earnings expectations and lower valuations, improving the risk-reward ratio.
The report's baseline scenario is that the AI theme will achieve significant excess returns over the next 1, 3, and 6 months, driven by stronger-than-expected earnings upgrades and persistent narrative momentum, which will also lift the broader market indices. Three specific sub-sectors—liquid cooling, optical networking, and inference computing—are all lagging behind the broader AI data center theme, suggesting room for catch-up growth.
**AI Infrastructure: Highest Conviction Area, Three Sub-Sectors Have Catch-Up Potential** Goldman's assessment of the AI theme is not generalized but precisely targeted at specific infrastructure sub-sectors.
The report notes that market focus on AI infrastructure is shifting from "large capital expenditure announcements" to "identifying emerging specialized equipment suppliers." Consequently, the bank recently adjusted its AI Data Center basket (GSTMTDAT), adding three new focuses: * **Inference Computing Beneficiaries (GSXUINFR):** By 2030, inference workloads are projected to account for over 40% of data center demand, with a compound annual growth rate of 35% through 2030. The core competency of related companies lies in optimizing efficiency metrics like "compute per dollar" and "first response latency." * **Liquid Cooling and Water Infrastructure (GSXUCOOL):** Traditional air cooling systems are insufficient for high-performance AI computing needs, making liquid cooling an emerging solution. While current US data center water usage is below 0.1% of the national total, it is expected to triple by 2030. The bank believes the market is significantly underestimating this demand growth. * **Optical Networking (GSXUOPTI):** AI training and inference require optical transceivers capable of 800Gbps and even 1.6Tbps. According to McKinsey data, 800Gbps transceiver capacity is expected to be 40-60% short of demand until 2027, and the supply gap for 1.6Tbps transceivers is projected to persist until 2029, with a shortage of 30-40%.
A key data point: Since ChatGPT's launch in November 2022, the bank's AI Data Center Infrastructure basket (GSTMTDAT) has surged 327%, compared to a mere 30% gain for the S&P 500 ex-AI (SPXXAI) over the same period. The three sub-sectors mentioned—liquid cooling, optical networking, and inference computing—have all lagged this broader AI data center rally, indicating remaining catch-up potential.
**Hedging Must Exclude AI: Traditional Index Hedging is "Self-Damaging"** With markets back at highs, hedging demand is rising. However, Goldman's warning is direct: using the traditional S&P 500 for hedging equates to shorting one's own most favored holdings.
The reason is simple: The weight of AI-related companies (including the Mag 7) in the S&P 500 has risen from about 25% at the time of ChatGPT's launch to approximately 45% currently. Shorting the index means shorting AI.
The bank recommends using SPXXAI (S&P 500 ex-AI) instead of the traditional index for hedging, alongside using GSPUMOXX to hedge momentum risk—the latter has a 92% correlation with the momentum factor and excludes consensus-strong names like AI, quantum computing, crypto-sensitive stocks, and meme stocks.
A similar issue exists in Asian markets. In South Korea's KOSPI, Samsung Electronics and SK Hynix together account for roughly 40% of the index weight. The bank suggests using the "Korea ex-SEC/Hynix Basket" (GSCBK198) or the "Korea ex-Mag 7 Basket" (GSCBKRX7) as hedging tools.
Data comparison: The KOSPI is up 37.72% year-to-date, while GSCBKRX7 has gained only 23.77% and GSCBK198 is up 26.26%—the hedging baskets have significantly underperformed but offer lower volatility and cheaper option execution costs.
**Don't Short Retail Investors: Retail Favorite Stocks Are Surging** The market rebound has created shorting opportunities, but Goldman emphasizes the need for "patience and selectivity."
For example, consider shorting the US Middle-Income Consumer basket (GSXUMIDC). The bank's research department's latest baseline forecast points to weakening end-demand and rising unemployment. Rising oil prices are expected to largely offset the growth boost from tax cuts. This basket has rebounded about 10% from its lows, which the bank views as a good opportunity to establish downside hedge structures like put spreads.
A fourth key judgment from the bank is equally clear: do not short retail investors.
The Retail Favorite Stocks basket (GSXURFAV) is experiencing its best monthly performance since November 2020, breaking a five-month streak of negative returns. Since late March, the basket has surged 24.3%, though it remains about 10% below its all-time high.
Two catalysts are combining: first, an overall market de-risking narrative is driving retail investors back; second, the SEC this week approved a FINRA proposal to modify the "pattern day trader rule," effectively lowering margin requirements and allowing smaller accounts to trade more frequently, directly benefiting retail trading activity.
**The "Post-Middle East Conflict" Era: Supply Chain, Global Trade, and M&A Opportunities** As Middle East conflicts gradually fade from market focus, Goldman is turning its attention to longer-term structural opportunities.
* **Saudi Pipeline Expansion:** Following energy supply concerns related to the Strait of Hormuz (SoH), markets are re-evaluating the strategic value of alternative energy transport routes. The Saudi East-West Pipeline (Petroline) has a full capacity of about 7 million barrels per day, far below the Strait of Hormuz's 19-20 million bpd, but it represents the region's only alternative route of comparable scale. Historical data shows that during the Petroline expansion in 2019, a local Saudi East-West Pipeline basket (GSXFPIPE, containing 18 Saudi stocks) outperformed the Saudi All Share Index by 24 percentage points. * **Biotech M&A:** As geopolitical noise subsides, strategic mergers and acquisitions are expected to return to market focus. Twelve M&A deals were announced in the biotech sector in Q1 2026, matching the count from Q4 2025, mostly "bolt-on" transactions concentrated in oncology and immunology/inflammation. Large biopharma companies have strong balance sheets, and with numerous drugs facing patent expiration pressure, the motivation for M&A is substantial.
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