Goldman Sachs is eyeing software stocks as a bright spot in an otherwise slumping AI trade.
So-called «phase 3» AI stocks are showing strength in sales revisions.
AI Infrastructure names are navigating a difficult year amid macro volatility and tech headwinds.
A slate of bad news has weighed on the artificial intelligence trade this year, but investors shouldn’t turn their back on the space yet.
While tech shares have been shaken by macroeconomic volatility and industry headwinds, a growing corner of AI-exposed stocks is flashing a strong signal.
According to Goldman Sachs, software companies likely to benefit from emerging AI tech are experiencing positive sales revisions year-to-date, in contrast to other areas of AI.
Expected consensus 2026 sales have been revised 0.3% higher year-to-date for these «phase 3» stocks. Compared to this, phase 2 equities — stocks related to AI infrastructure — have seen consensus sales revised 0.3% lower.
The downside revision is the same for phase 4 stocks, a group expected to rise from AI’s labor productivity gains.
«We continue to believe that AI Phase 3 offers better risk/reward for new capital than AI Phase 2,» Goldman said in a Thursday note. «As the cost of AI continues to decline, we expect investors will begin to seek companies with AI-enabled revenues. Even after the sell-off, the relative valuation of AI Phase 2 stocks is still slightly above its historical average, while AI Phase 3 stocks trade slightly inexpensive vs. history.»
Here are the software stocks that Goldman expects will notch the fastest sales growth in the next two years, with estimates for their compound annual sales growth rate between 2024 and 2026.
The bank’s optimism offers a silver lining in what’s been a gloomy period for the tech trade, with phase 2 stocks falling out of favor.
The sector has soared since 2022 on the rapid buildout of AI infrastructure, which boosted demand for semiconductors and related hardware. But this year’s growing rivalry from China’s tech sector, paired with concern about overloaded valuations, has pushed these equities into negative territory.
The main concern is that rising AI efficiencies will weigh on hardware demand, calling into question the massive spending levels by AI hyperscalers. This is pressuring down chipmakers: since mid-February, the Philadelphia Semiconductor index has dropped nearly 15%.
Even positive earnings aren’t enough to shore up confidence. A fourth-quarter beat from the kingpin chipmaker Nvidia did little to slow the fall in its share price this year. The leading AI firm is now trading in a bear market, down 20% from its February high.
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