Goldman Sachs Bullish on Semiconductor Stocks Ahead of Earnings

Goldman Sachs has identified several semiconductor companies with potential upside ahead of their earnings reports, including Applied Materials, Seagate Technology, and Microchip Technology. The firm anticipates broad-based upside across most semiconductor sub-sectors in the third quarter, despite a recent 11% decline in the semiconductor index over the past two months.

Goldman Sachs maintains a Buy rating on Applied Materials, expecting the company to raise its margin targets and provide a robust growth outlook at SEMICON West in October. The firm also holds a Buy rating on Cadence Design Systems, predicting increased guidance for 2026 driven by agentic AI, and on Microchip Technology, citing strong demand from industrial, aerospace/defense, and datacenter sectors.

The firm has assigned a Neutral rating to Qualcomm, KLA Corporation, and Western Digital. While KLA Corporation currently trades at $206.89 with a P/E ratio of 56.39, it has surged 9.37% over the past week, and 20 analysts have recently revised their earnings upwards. Despite the Neutral rating, Goldman Sachs notes that Qualcomm may be ahead of itself tactically due to high investor expectations tied to agentic AI.

KLA Corporation recently reported its fourth-quarter fiscal 2026 results, exceeding expectations with $3.658 billion in revenue and a 62.4% gross margin. Product revenue increased 7% quarter-over-quarter and 15% year-over-year, while services revenue rose 17% year-over-year. Analysts have responded with mixed adjustments to their price targets, reflecting varied sentiment about the company's future performance.