Goldman Sachs Names Top Semiconductor Stocks Ahead of Earnings

Goldman Sachs has adopted a more optimistic stance on semiconductor stocks ahead of third-quarter earnings, following a recent sector pullback. Analysts led by James Schneider noted that the sector has declined 11% over the past two months, contrasting with a 4% gain for the broader market. Goldman highlighted Applied Materials, Seagate, and Microchip as tactical picks, citing strong growth prospects in sub-sectors like semiconductor equipment, compute, and storage.

The firm expects Applied Materials to raise margin targets and provide a robust growth outlook at SEMICON West on October 13. Analysts anticipate a strong report driven by DRAM and advanced logic, with the wafer fab equipment market projected to grow toward $300 billion over time. The stock has already rallied about 12% in the past week, setting high expectations.

For Seagate, Goldman forecasts a strong quarter due to positive hard disk drive pricing and supportive demand. The firm projects about 2% revenue upside and guidance roughly 3% above consensus. Analysts praised Seagate’s supply strategy and progress in advanced HAMR technology, positioning the company for incremental share gains.

Goldman also expects broad strength across end markets for Microchip, led by datacenter and aerospace and defense sectors. The firm predicts about 1% revenue upside and gross margin recovery to roughly 66% by the end of 2026. Analysts believe the market underestimates the analog recovery, calling Microchip one of their favorite names.

The firm also flagged downside risks for Qualcomm, KLA, and Western Digital, all rated Neutral. Analysts cautioned that Qualcomm’s expectations tied to agentic AI may be too high, KLA’s results may lag peers due to DRAM spending, and Western Digital may underperform Seagate.