AI Rally Style Shifts: Goldman Sachs Advises Selling Chip Stocks, Adding Cloud Providers Such as Amazon and Microsoft

TradingKey - On June 26, Eastern Time, the investment sentiment for the AI rally in the U.S. stock market shifted, though the anomaly was not apparent at the index level. The three major U.S. stock indices posted flat performances today: the Dow Jones Industrial Average edged down 0.03% to 51,903.34; the Nasdaq Composite Index ticked down 0.01% to 25,356.26; and the S&P 500 Index rose 0.09% to 7,363.84.

[Source: FutuBull]

However, at the sector level, affected by intensifying concerns over the continuous rise in AI infrastructure costs, previously strong AI infrastructure stocks all suffered setbacks today, with both memory and chip stocks falling. Among them, SanDisk (SNDK) fell 9.22%, Marvell Technology (MRVL) fell 5.31%, Lam Research (LRCX) fell 4.90%, Arm Holdings (ARM) fell 4.83%, Micron Technology (MU) fell 4.60%, Qualcomm (QCOM) fell 3.70%, and Intel (INTC) fell 3.52%.

But the Magnificent Seven (MAG7) bucked the trend and rallied today. Excluding Google and Nvidia, the remaining five stocks all posted gains. Microsoft (MSFT) rose 5.30%, Meta Platforms (META) climbed 2.28%, Tesla (TSLA) gained 2.23%, Apple (AAPL) advanced 2.07%, and Amazon (AMZN) added 1.56%.

Goldman Sachs explained this trend, noting a shift in allocation styles within the AI rally and recommending a rotation from the highly volatile semiconductor sector to cloud computing giants.

The semiconductor sector has led the gains in this AI bull market, with the Philadelphia Semiconductor Index surging 150% in a year. Massive capital inflows utilizing leveraged instruments such as ETFs and options have crowded the trade, leading to a significant accumulation of volatility risk.

Goldman Sachs strategists advise investors to moderately take profits in the chip sector and diversify their allocations into leading cloud service providers and tech giants like Amazon, Microsoft, and Meta.

The firm noted that previous market concerns over rising capital expenditures from cloud providers expanding data centers—which threatened to erode profits—had caused tech giants to temporarily underperform the chip sector. However, as the AI boom continues to be validated, cloud service providers, as the ultimate adopters of computing power demand, offer stronger long-term earnings certainty, hedging against the cyclical supply-demand volatility of the semiconductor industry.

The firm further noted that easing navigation issues in the Strait of Hormuz have alleviated geopolitical inflationary pressures, pushing inflation expectations downward. At the same time, sustained AI capital expenditures continue to support corporate earnings, boosting market risk appetite. Both factors bode well for the investment environment.

Meanwhile, Goldman Sachs warned that while investor optimism is currently elevated, it does not mean the rally is peaking. However, if core bullish drivers such as fundamentals or geopolitical factors weaken, the market is highly likely to experience a temporary correction, meaning investors must diversify across sectors to hedge against volatility risks.