Goldman Sachs Bullish on Semiconductor Stocks Ahead of Earnings

Goldman Sachs has identified several semiconductor stocks with potential upside ahead of earnings, while also highlighting some with downside risks. The firm sees positive momentum for Applied Materials, Seagate Technology, and Microchip Technology, driven by strong industry demand and growth prospects. Goldman Sachs maintains a Buy rating on Applied Materials, anticipating margin target increases and a robust growth outlook at SEMICON West in October. The firm also expects a strong earnings report, fueled by demand in DRAM and advanced logic sectors.

The firm holds a Buy rating on Cadence Design Systems, predicting increased guidance for 2026 and positive commentary on recurring revenue growth tied to agentic AI. Microchip Technology is also rated Buy, with upside expected from industrial demand, aerospace/defense, and datacenter sectors.

However, Goldman Sachs rates Qualcomm, KLA Corporation, and Western Digital as Neutral. KLA Corporation, currently trading at $206.89 with a P/E ratio of 56.39, is considered overvalued relative to its Fair Value, despite a recent 9.37% surge. Analysts have mixed views on KLA's future performance, with price targets ranging from $225 to $325.

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