Goldman Sachs said this week’s market action fits a classic deleveraging pattern, with underlying logic similar to the July sell-off. The bank said its high-beta momentum basket fell 12% this week, while its AI hedge basket dropped 10% over five days. Even though leverage in the AI segment has already come down from extreme highs, inertia-driven capital is still supporting rapid and indiscriminate dip-buying.
Goldman said the AI trade is not over, but the phase in which investors could generate excess returns from a broad rise across the sector is changing. In its view, the focus should now shift to pockets where share prices and earnings per share have clearly diverged. The firm highlighted storage and data center names as the area with the most visible valuation gap, saying earnings recovery has yet to be fully reflected in stock prices, which gives the group the strongest tactical appeal.
The bank also pointed to Nvidia’s second-quarter earnings and an industry conference in September as upcoming catalysts. At the same time, momentum positioning is being reset: software has replaced semiconductors as the biggest weight in the three-month momentum long basket, while semiconductors and the broader AI complex have moved into the short basket.
Goldman Sachs said on Aug. 23 that this week’s market move was a typical deleveraging trade, driven by logic similar to the sell-off seen in July.
According to the bank, its high-beta momentum basket fell 12% this week, while its AI hedge basket dropped 10% over five days. Even with leverage in the AI sector having already retreated from extreme highs, inertia-driven flows are still pushing fast, indiscriminate dip-buying.
Goldman says the AI trade is still alive
Goldman said the AI trade has not ended, but the period when investors could earn excess returns from a broad-based rise across the whole sector is changing. The bank said the focus now should be on opportunities where stock prices have clearly diverged from earnings per share.
It identified storage and data center stocks as the area with the most pronounced valuation gap, saying the recovery in earnings has not yet been fully reflected in share prices, leaving the group with the strongest tactical appeal.
Next catalysts and shifts in positioning
Goldman pointed to Nvidia’s second-quarter earnings and an industry conference in September as the next catalysts to watch.
At the same time, the momentum factor is being reset. Software has replaced semiconductors as the largest weight in the three-month momentum long basket, while semiconductors and the broader AI complex have moved into the short basket. Goldman also said capital is rotating into previously overlooked areas including banks in Europe and Japan, gold miners, and copper mining stocks.
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