The AI trade is so back

We just got through the worst quarter for stocks since 2022, with investors hiding out in the “HALO trade” while they abandoned tech. But AI is back in the spotlight today, reminding everyone it’s still very much alive and well.

Take a look at these three headlines proving there’s still plenty of life left in the ol’ AI trade:

• Broadcom: Shares rebounded 6.21% after a slow start to the year, following a new deal to create AI chips for Google and an expanded partnership with Anthropic.
• Samsung: Posted blowout Q1 results, with profits surging 700% on strong memory demand. Shares rose 1.76% this afternoon.
• ASML: Shares eked out a 0.19% gain after new US restrictions on selling semiconductors to China threatened the company’s already-weak sales outlook in the region.

Goldman’s bullish case

With headlines whipping tech stocks around day to day, and value stocks crushing their growth counterparts last quarter, it’s hard to tell what the right move is. But Goldman Sachs has found a signal in all that noise: After the tech sector posted its weakest relative returns in 50 years, it’s time to buy the dip.

To be fair, investors’ concerns aren’t entirely unfounded. Hyperscalers are pouring record levels of capex into AI, while software companies face growing disruption risks. But Goldman argues the market has overcorrected: Globally, the IT sector is now trading at a lower P/E than consumer discretionary, staples, and industrials, even as Goldman expects IT earnings to grow 44% this quarter versus just 12% for the S&P 500. The result is a record gap between weak stock performance and strong underlying earnings growth that Goldman says investors should take advantage of.

Beyond that valuation disconnect, Goldman sees the Iran war as a longer-term positive catalyst for tech. The conflict has pushed expectations of inflation and rates higher, weighing on valuations in the short term—but that pullback has made the tech sector more attractively priced. If the shock eventually slows growth and caps yields, tech’s stable cash flows could drive outperformance.

Finally, Goldman argues that, contrary to popular belief, the tech sector doesn’t resemble a bubble. Valuations are relatively restrained, and the kind of speculative frenzy typically seen in bubbles—such as a tsunami of IPOs—is largely absent.

The bottom line: Goldman is clearly bullish on tech. But with geopolitics, interest rates, and domestic policy all in flux, the question is whether this is actually the dip to buy—or just another bump in a very choppy market.—SY