AI chipmakers have dominated the first wave of the AI boom. But Goldman Sachs says investors may want to start looking at the next stage of the trade beyond semiconductor stocks.
The shift comes as the AI rally increasingly focuses on infrastructure names, even as investors begin looking for the next winner, analysts at the bank said in a post on Monday.
“The general idea is that if customers grow, semiconductor companies should grow,” said James Covello, head of global equity research at Goldman Sachs.
“No one should prosper at the expense of the companies higher up the chain,” Covello added.
Covello added that the current situation, where semiconductor companies are posting record revenues and profits while the rest of the AI ecosystem continues to spend aggressively, is “unprecedented and unsustainable.”
The call comes after a multi-year rally in AI chip stocks, led by Nvidia, which has become one of Wall Street’s biggest winners as tech companies race to build out AI infrastructure and data centers.
But investors are increasingly questioning which companies will ultimately translate their massive spending on AI into durable profit growth.
Goldman said it now expects hyperscalers to outperform semiconductor companies.
According to Goldman, “Investors have become highly skeptical about the returns that hyperscalers will deliver. Once companies begin to show returns from AI investments, investors may be willing to pay higher multiples for these stocks again.”
Hyperscaler stocks could also benefit if companies reduce AI spending to improve cash flow, even if profitability from enterprise AI deployments remains difficult. This scenario could weigh on semiconductor stocks while boosting hyperscaler stocks, Goldman added.
The biggest risk to Goldman’s view is that hyperscalers continue to pour money into AI infrastructure without seeing meaningful benefits from enterprise adoption. In that scenario, semiconductor companies would likely continue to capture most of the gains from AI investments, the bank said.