Goldman Sachs names top semiconductor stocks ahead of earnings season
Goldman Sachs has identified a more favorable trading environment for semiconductor stocks ahead of third-quarter earnings, following a recent sector pullback. Analysts led by James Schneider noted that the semiconductor index has dropped 11% over the past two months, contrasting with a 4% gain for the broader market. Goldman expects positive earnings surprises across several sub-sectors, particularly in semiconductor equipment, compute, and storage.
Applied Materials is one of Goldman's top picks, with expectations of raised margin targets and a strong growth outlook during its SEMICON West presentation on October 13. Analysts anticipate robust results 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.
Seagate is another key recommendation, with Goldman forecasting a strong quarter supported by positive hard disk drive pricing and favorable demand conditions. The bank projects about 2% revenue upside and guidance roughly 3% above consensus estimates. Analysts highlighted Seagate’s prudent supply strategy and advanced HAMR progress as competitive advantages.
Microchip Technology is expected to benefit from broad strength in end markets, particularly in datacenter and aerospace and defense sectors. Goldman anticipates about 1% revenue upside and gross margin recovery to roughly 66% by the end of 2026. The analysts believe the Street is underestimating the analog recovery, making Microchip one of their favorite names.
On the downside, Goldman flagged potential risks for Qualcomm, KLA, and Western Digital, all rated Neutral. Analysts cautioned that Qualcomm may be overvalued due to high expectations tied to agentic AI, KLA’s results may lag peers as spending skews toward DRAM, and Western Digital is expected to underperform Seagate.