Goldman Sachs warns that the AI-led stock market rally is creating a more concentrated trading environment for investors.
The AI-fueled rally that has helped push the S&P 500 to repeated record highs also creates risks as market gains become increasingly tied to one dominant theme, says Ben Snyder, a strategist at Goldman Sachs. Reports Seeking alpha.
The report says Goldman deployed an “insensitive portfolio” of stocks that had positive earnings revisions but relatively low sensitivity to AI-related trading and changing economic growth expectations.
The list includes pharmaceutical company Eli Lilly, social media giant Reddit, gold mining company Newmont, food processing company Archer-Daniels-Midland, and Casey’s General Stores.
Goldman’s screen comes as investors continue to focus heavily on companies related to artificial intelligence, semiconductors and technology infrastructure.
The company says some sectors outside of AI trading have shown less relevance to these topics, including consumer staples, healthcare and real estate.
According to the report, the current rally differs from previous valuation-driven increases because earnings expectations have also improved, especially for companies related to AI and energy infrastructure. However, earnings estimates were more stable outside those regions.
The risk, Goldman says, is that the market increasingly behaves like “one big trade,” with more stocks moving in relation to the same AI-driven factors.
The bank’s non-sensitive portfolio is designed to identify stocks with positive earnings momentum that are less exposed to AI and macro growth sensitivity, the report says.
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