The AI industry has had a rocky start to 2026, but Goldman Sachs says large-cap tech stocks hit by market rotation could turn around later this year.
The Magnificent Seven stocks have fallen behind the S&P 500 as a leader in AI trading. Goldman expects AI gains to continue to grow from mega-cap stocks, but analysts outline three catalysts that could revive Meta, Microsoft, Amazon, and Alphabet’s market leadership in the second half of 2026.
“Hyperscaler earnings dispersion is likely to persist in the short term, but we see three potential triggers for a change this year,” the analysts said.
Here are three drivers of potential turnaround for mega-cap laggards that Goldman is watching this year.
1. AI revenue growth accelerates
Companies reporting increased revenue related to AI will allay concerns about overspending.
“The acceleration of AI-related revenues will confirm investors’ belief in the bottom line of continued investment spending and the long-term return potential of hyperscalers,” the analysts said.
They added that rising AI-related revenues will allow investors to see a path to AI monetization, justifying the large spend.
Goldman says the latest financial results from Big Tech companies support this idea. Hyperscalers have raised their outlook for capital investment, but the stock prices have not reacted uniformly.
While Microsoft fell due to sluggish cloud growth and Amazon fell due to its inline sales policy, Meta soared due to a strong revenue outlook and solid advertising business earnings.
2. AI spending growth slows
Goldman expects AI capital spending growth to peak in 2026 and then slow, allowing investors to better assess a company’s earnings potential.
Hyperscaler spending continues to account for 92% of operating cash flow, higher than during the dot-com bubble.
“A slowdown in capital spending growth could put the bottom in free cash flow into perspective and help investors revalue these companies on an earnings basis,” the analysts said.
3. Cyclical stocks lose momentum
The stock market has seen a shift from tech stocks to cyclical stocks, and recently concerns about AI transforming the global economy have supplanted traditional tech leaders.
“The changing macroeconomic backdrop from accelerating to decelerating growth will prompt investors to seek opportunities in long-term growth stocks,” the analysts said.
Goldman economists expect the U.S. economy to grow in the first half of this year, supporting cyclical stocks that are generally unrelated to AI. They expect economic growth tailwinds to peak in mid-year and slow in the second half of 2026.
