Goldman Sachs: Tech Selloff a Blip Amidst Positive Economic Outlook
Despite investors' concerns over the recent tech-led selloff, Goldman Sachs strategists believe it's only a temporary setback. They cite a positive economic outlook and low recession probability in the next 12 months.
While the rapid adoption of Chinese AI firm DeepSeek's cheaper model initially wiped out nearly $1 trillion from the Nasdaq 100, Goldman analysts believe it's not indicative of a sustained decline. They attribute the selloff to fears of US dominance in AI and overvaluation of companies like Nvidia Corp., but emphasize that it will be limited.
Falling interest rates and moderating inflation will support risk assets, they contend. However, strategists note that elevated valuations and market concentration remain. They recommend geographical diversification and broadening sector exposure.
Despite current market dynamics, Goldman strategists maintain that the dominance of US equity markets, tech sectors, and large companies is not a bubble driven by irrational exuberance, but a reflection of strong fundamentals. However, superior earnings growth at the index level is expected to fade, creating opportunities for diversification.