- Goldman Sachs strategists said hyperscalers are trading well below their historical valuations following a selloff in major technology stocks.
- The bank forecasts S&P 500 EPS growth to slow to 11% in 2027 from 36% in 2026.
- Goldman favors U.S. and Japanese equities but is ‘Underweight’ on Europe.
Goldman Sachs strategists led by Peter Oppenheimer reportedly see technology stocks, particularly artificial intelligence (AI) hyperscalers, as relatively defensive investments after a recent selloff pushed their valuations below historical levels.
The firm expects the S&P 500 to climb about 14% to 8,700 points over the next 12 months, despite forecasting a sharp slowdown in corporate earnings growth, Bloomberg reported on Friday. Goldman is overweight U.S. and Japanese equities heading into 2027.
At the time of writing, Nasdaq 100 futures were marginally lower, signaling a muted opening for technology stocks. On Stocktwits, retail sentiment around the Invesco QQQ Trust (QQQ), which tracks the Nasdaq 100, remained in ‘bullish’ territory.
Hyperscalers Seen As Relatively Defensive
The Nasdaq-100 has fallen over 9% from its early October peak amid concerns about AI infrastructure spending and the controversy surrounding Nvidia (NVDA) former CEO Jensen Huang.
Over the past month, META shares have declined about 18%, GOOG stock has fallen nearly 16%, ORCL stock has shed over 11%, and MSFT stock has slipped nearly 4%. Amazon (AMZN) has bucked the trend, gaining more than 3% over the same period.
Goldman strategists said the decline has left hyperscalers trading “well below” their historical valuations. “We see Technology — and the Hyperscalers in particular — as relatively defensive,” they said as per the note cited by the publication.
They acknowledged that the largest companies have turned cash-flow negative but said their broader balance-sheet measures, including net debt relative to equity, remain healthy.
Goldman forecasts S&P 500 earnings-per-share (EPS) growth will slow to 11% in 2027 from 36% in 2026. For Europe's Stoxx 600 index, it expects growth to ease to 7% from 18%.
The strategists expect investors to increasingly favor businesses that can sustain growth as earnings expansion becomes less widespread, the publication said. They identified opportunities in long-duration growth companies, which they expect to become more valuable as growth rates slow.
Goldman Sachs also favors industries that typically benefit from falling bond yields, easing inflation and lower oil prices.
The firm remains ‘Underweight’ on European equities, citing valuations that have declined less than in other regions, alongside government debt concerns and a busy political calendar.
Retail Investors’ Sentiment Around Hyperscale, AI ETFs
On Stocktwits, retail sentiment around AI infrastructure-focused exchange-traded funds (ETFs) was mixed, with the Defiance AI Hyperscale Leaders ETF (AIHY) and VistaShares Artificial Intelligence Supercycle ETF (AIS) in ‘neutral’ territory.
Meanwhile, sentiment around the VanEck Data Center Supply Chain ETF (RACK) and Global X Data Center & Digital Infrastructure ETF (DTCR) was ‘bearish’.