Buy a dip in AI stocks, Goldman Sachs says by Investing.com

Investing.com — Goldman Sachs analysts told investors in a recent note to take advantage of AI stocks following a recent decline, saying AI-related companies remain fundamentally strong.

“Buy the AI ​​discount,” the investment bank captioned its note. They explained that their data center AI basket (GSTMTDAT) and PC and mobile AI upgrade basket (GSXUPCAI) “returned to benchmark” while the Broad AI basket (GSTMTAIP) fell 12% compared to the year to date. tall.

Despite this decline, these stocks are “beating earnings by an average of 8%,” which is about 3 percentage points higher than , and are now trading at a discount to forward earnings expectations.

Goldman Sachs highlighted several key factors that could support a rally in AI stocks.

They anticipate interest rates to boost IT projects, while the conclusion of the upcoming election is expected to reduce economic policy uncertainty.

Moreover, the bank anticipates tangible advances in AI products at upcoming industry conferences.

Referring to recent developments, they cited a notable comment from NVIDIA’s CEO at a Goldman technology conference that highlighted the significant return on investment for hyperscale customers, noting that for every dollar spent on NVIDIA (NASDAQ: ) infrastructure, $5 of rental income is generated. .

Additionally, the bank says valuations in the AI ​​space have now normalized.

According to Goldman Sachs, their AI data center and broad AI baskets are only slightly above the S&P 500 in terms of valuations after a period of high premiums in the spring.

They believe that “AI expressions are cheap for YTD earnings trends” and further declines would likely require “bad bad news”, which they consider unlikely.

Goldman also points to the growing role of data centers in driving U.S. energy demand, projecting that they will account for about 90 basis points of a 2.4% CAGR in U.S. energy demand through 2030.