Goldman Sachs pointed out that even though the market is tired of AI concept stocks, high-quality AI stocks are still attractive as these companies have strong technical foundations, market positions, or growth potential in the AI field. In addition, Nvidia's financial report, which will be released at the end of this month, may have a major impact on the entire AI market.
As August's calm was shattered, Wall Street experienced the "wildest week in history". After the turbulence, where will the AI stocks of US stocks go?
Goldman Sachs analyst Peter Callahan pointed out in a recent report that although the Nasdaq and the volatility index almost returned to their starting point at the end of the week, the market experienced violent fluctuations.
Callahan said the market is becoming more cautious about AI stocks, looking for stocks that are independent of AI narratives, and also closely monitoring high-quality AI stocks that have fallen back in the early stages.
Callahan further pointed out that if the market continues to discuss whether it will peak in 2025 in the next few months, it can continue to cautiously increase those discounted high-quality AI stocks, even if they only moderately fall from the high point.
"Long-term optimism, short-term fanatical decline."
Goldman Sachs pointed out that investors have shown a certain degree of fatigue towards beta/volatility related to AI, especially for stocks that fluctuate more than 5% daily. Now, investors are eager to find stocks that are unrelated to AI/capital expenditure narratives.
Although investors believe that GAI is worth investing in in the long term, they are now paying more attention to narrative risks, that is, investing in a theme that may have lost momentum, and this sentiment is causing investors to tighten investment exposure.
The management teams of major technology companies seem to be more confident in the return investment ratio of AI than investors, which indicates that the management has stronger confidence in the long-term revenue potential of GAI.
Goldman Sachs believes that investors do not doubt the speed of spending in the next few quarters, nor do they doubt the existence of GAI as a long-term opportunity. However, investors have doubts about the mid-term prospects of the AI theme, mainly because the current cost seems to be high and the degree of monetization is low. The market is worried that short-term investments may not immediately pay off.
High-quality AI stocks may become "hotcakes".
Goldman Sachs further pointed out that even if there is fatigue towards AI, investors are still paying attention to discounted high-quality AI stocks, which may provide better risk-return ratios.
Goldman Sachs believes that,
On the one hand, investors may reinvest in AI stocks that have fallen sharply from their highs and have almost wiped out all the gains since the beginning of the year. These AI stocks' prices have already reflected the market's pessimistic expectations, so there is room for rebound.
On the other hand, if the market thinks that 2025 may reach its peak, investors may be more inclined to choose those AI stocks that do not have a significant drop in price but have high quality and long-term growth potential.
Goldman Sachs concluded that no matter which strategy is adopted, high-quality AI stocks are considered attractive. These companies have a strong technological foundation, market position, or growth potential in the AI field.
In addition, Goldman Sachs reminded that the upcoming Nvidia financial report may have a significant impact on the entire AI market. If Nvidia's financial report exceeds expectations, it may boost the market sentiment; if it is lower than expected, it may increase the market's uncertainty.
Editor/Somer