After a week of "ups and downs", Goldman Sachs re-evaluates AI stocks: high-quality companies are very attractive

As the tranquility of August was shattered, Wall Street experienced the "craziest week ever", where will the US AI stocks go after the turmoil?

Goldman Sachs analyst Peter Callahan pointed out in a recent report that although the Nasdaq and volatility index almost returned to the starting point by the end of the week, the market experienced intense volatility.

Callahan stated, the market is becoming more cautious towards AI stocks, looking for stocks that stand independently from the AI narrative, while also closely monitoring high-quality AI stocks that have fallen in the previous period.

Furthermore, Callahan pointed out that if the market continues to discuss whether 2025 will be the peak in the coming months, it may be prudent to continue cautiously adding discounted high-quality AI stocks, even if they have only moderately fallen from their highs.

Long-term Optimism, Short-term Frenzy Retreat

Goldman Sachs noted that investors have shown some fatigue towards beta/volatility related to AI, especially for stocks with daily fluctuations exceeding 5%. Investors are now eager to find stocks unrelated to the AI/capital expenditure narrative.

While investors believe that GAI is a worthwhile long-term investment, they are now more concerned about narrative risks, investing in a theme that may have lost momentum, leading to investors tightening their investment exposure.

Management teams of large tech companies seem to have more confidence in the return on investment of AI than investors, indicating a stronger belief in the long-term profit potential of GAI.

Goldman Sachs believes that investors do not doubt the pace of spending in the coming quarters, nor the existence of GAI as a long-term opportunity. However, investors have doubts about the mid-term outlook for the AI theme, mainly due to the currently high costs and low monetization levels, with concerns that investments in the short term may not yield immediate returns.

High-quality AI Stocks May Become "Hot Cakes"

Goldman Sachs further pointed out that despite fatigue towards AI, investors are still paying attention to discounted high-quality AI stocks, which may offer better risk-return ratios.

Goldman Sachs believes,

On one hand, investors may reinvest in AI stocks that have fallen significantly from their highs and have almost wiped out all gains since the beginning of the year. These AI stocks' prices already reflect the market's pessimistic expectations, hence there is room for a rebound.

On the other hand, if the market believes that 2025 may be the peak, investors may be more inclined to choose high-quality AI stocks with long-term growth potential, even if they have not experienced significant price declines.

Goldman Sachs concluded that regardless of the strategy adopted, high-quality AI stocks are considered attractive, with these companies having strong technological foundations, market positions, or growth potential in the AI field.

In addition, Goldman Sachs warned 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 market sentiment; if it falls below expectations, it may exacerbate market uncertainty