MW Why 'Rule of 10' stocks like Nvidia and Meta are now poised for a comeback, according to Goldman Sachs
By Jamie Chisholm
Higher bond yields have been hitting secular growth stocks, but that may be about to change
(L to R) Jensen Huang, President and CEO of Nvidia Corporation, Google CEO Sundar Pichai, and Mark Zuckerberg $(R)$, CEO of Meta, each preside over so-called Rule of 10 companies.
Oil prices are surging again. Usually, that's likely to make investors worried about the damage being done to the economy and make companies enjoying secular growth - long-term, structural expansion in sectors largely independent of short-term economic cycles - that much more attractive.
But many such secular growth stocks - say software over recent decades, and AI more recently - have been having a rotten time of late. "The de-rating of secular growth," is how a team of strategists at Goldman Sachs led by Ben Snider summarize the recent market shift.
In a note published late Friday, the Goldman team observe that while the S&P 500 SPX has rebounded to within 2% of its record high, secular growth stocks remain more than 20% below their highs of October 2025.
"Secular growth stocks have faced a series of challenges in recent months, including expectations of economic acceleration, surging bond yields, and AI disruption risk," they say.
This has seen stocks with high revenue growth suffer contracting valuations in recent months.
Goldman's definition of secular growth stocks are those S&P 500 firms, excluding financials, real estate, and utilities, that meet its "Rule of 10" sales growth criteria. The criteria are that companies grew sales by at least 10% during each of the prior two years and where consensus estimates indicate sales growth of at least 10% in the current year and each of the next two years.
Goldman's own evolving Rule of 10 basket has underperformed the equal-weight S&P 500 by 27 percentage points during the past six months, "one of the worst stretches of underperformance during the past 15 years," says the bank.
Underperformance of secular growth stocks began in late 2025, according to Goldman, as expectations for strong economic growth in 2026 led investors to rotate toward cyclical stocks with more exposure to the economy.
Indeed, "the median stock in our secular growth screen has experienced a 30% [price-to-earnings] compression during the past few months and now trades at nearly the lowest valuation multiple in a decade," the Goldman team add.
But now they expect the basket's performance to start improving as "the diminished outlook for economic growth against a backdrop of elevated oil prices and uncertainty should drive increased focus on companies with strong idiosyncratic growth profiles."
Goldman's economists also think that the market's expectations of a Fed policy response to growing inflationary pressures is too hawkish. They see the 10-year Treasury yield falling decline by roughly 20 basis points to 4.1% by year-end. That should be another tailwind for secular growth stocks, they say.
The recent dive in many software stocks IGV on fears they will be disintermediated by AI means that sector now has more members in Goldman's Rule of 10 screen. Still, Goldman warns that "resolving this uncertainty will likely require evidence that AI is not displacing existing business models."
The non-software stocks that meet Goldman's Rule of 10 criteria, and ranked by expected 2027 sales growth, include: Broadcom $(AVGO)$, Advanced Micro Devices $(AMD)$, Nvidia (NVDA), Arista Networks (ANET), Meta Platforms (META), Alphabet $(GOOGL)$, Uber Technologies (UBER), Netflix $(NFLX)$, and Amazon.com (AMZN).
The markets
U.S. stock-index futures (ES00) (YM00) (NQ00) are lower as oil prices (CL.1) bounced higher and gold futures (GC00) are trading around $4,740 an ounce.
Key asset performance Last 5d 1m YTD 1y S&P 500 6824.66 3.68% 2.28% -0.30% 29.55% Nasdaq Composite 22,822.42 4.31% 2.29% -1.81% 39.27% 10-year Treasury 4.298 -2.20 1.60 12.60 -19.60 Gold 4774.6 1.53% -4.95% 10.21% 46.67% Oil 98.54 -12.06% -0.77% 71.64% 60.28% Data: MarketWatch. Treasury yields change expressed in basis points
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The buzz
U.S. President Donald Trump said he will put a naval blockade on Iranian ports from 10 a.m. Eastern after peace talks between the U.S. and Iran failed over the weekend.
Trump also threatened China with a 50% tariff if it aided Iran's war efforts, and he criticized Pop Leo, accusing him of catering to the "radical left."
Goldman Sachs $(GS)$ kicks off the first quarter corporate earnings season, followed Tuesday by a batch of other banks.
U.S. economic data due Monday include existing home sales for March, released at 10 a.m.
Fed officials making comments include governor Stephen Miran speaking at a financial system symposium at 6:20 p.m.
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The chart
Source: Sentimentrader
The heavy buying of shares by those supposedly in the know is something many investors follow. The chart, posted on X last week by Jay Kaeppel, senior market analyst at Sentimentrader, is therefore worthy of note. It shows that the total number of corporate insiders of companies covered by the State Street Technology Select Sector SPDR ETF XLK that have bought shares on the open market during the past six months is at a 15-year high.
Top tickers
Here were the most active stock-market tickers on MarketWatch as of 6 a.m. Eastern.
Ticker Security name NVDA Nvidia TSLA Tesla AMZN Amazon.com PLTR Palantir Technologies GME GameStop NIO NIO TSM Taiwan Semiconductor Manufacturing AMD Advanced Micro devices AAPL Apple MSFT Microsoft
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Beyond the newsroom
MarketWatch Picks: I'm 33, make $240K and contribute 6% to my 401(k). I wiped out my savings to pay for school - and still have debt. Now what?
-Jamie Chisholm
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April 13, 2026 07:02 ET (11:02 GMT)
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