Goldman Sachs is warning that the artificial intelligence (AI)-driven stock market rally is creating a more concentrated trading environment for investors.
Goldman Sachs strategist Ben Snider says the AI-fueled rally that has helped push the S&P 500 to repeated record highs is also creating risks as market gains become increasingly tied to one dominant theme, reports Seeking Alpha.
The report says Goldman published an “insensitive portfolio” of stocks that have positive earnings revisions but relatively low sensitivity to AI-related trading and changing expectations for economic growth.
The list includes pharmaceutical firm Eli Lilly, social media giant Reddit, gold mining company Newmont, food processing company Archer-Daniels-Midland and Casey’s General Stores.
Goldman’s screen comes as investors continue to focus heavily on companies tied to artificial intelligence, semiconductors and technology infrastructure.
The firm says some sectors outside the AI trade have shown lower correlation to those themes, including consumer staples, health care and real estate.
According to the report, the current rally differs from prior valuation-driven surges because earnings forecasts have also improved, particularly for companies tied to AI infrastructure and energy. However, earnings estimates have been flatter outside those areas.
Goldman says the risk is that the market increasingly behaves like “one big trade,” with more stocks moving in relation to the same AI-driven factors.
The report says the bank’s insensitive portfolio is designed to identify stocks with positive earnings momentum that are less exposed to AI and macro-growth sensitivity.
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