Goldman Sachs Turns Bullish on Semiconductor Sector After 11% Drop
After an 11% drop over two months, Goldman Sachs has turned bullish on the Philadelphia Semiconductor Index (SOX), citing improved risk-reward dynamics ahead of Q3 earnings reports. The investment bank noted that while the SOX index fell sharply, the S&P 500 rose 4%, creating a divergence that has shifted trading positions from caution to a more constructive stance.
Goldman Sachs highlighted several sub-sectors within the semiconductor ecosystem poised for upward revisions in earnings forecasts. The report emphasized extended visibility for wafer fab equipment (WFE) spending, now locked in by customers and extending to 2028. Applied Materials (AMAT.US) was listed as a top pick with a target price of $670, while Lam Research (LRCX.US) was assigned a “Buy” rating with a target price of $380. KLA Corp (KLAC.US), however, was classified as a tactical underperformer due to its limited exposure to process control.
The report also reassessed the value of server CPUs and ASICs amid continued upward revisions in cloud providers' capital expenditure. Advanced Micro Devices (AMD.US) saw its target price raised from $640 to $700, with expectations of strong Q3 earnings driven by Agentic AI demand. Cadence Design Systems (CDNS.US) was regarded as the stock “least vulnerable to AI disruption,” with a target price of $470. Qualcomm (QCOM.US), however, was flagged for potential tactical correction due to high market expectations for Agentic AI.
In the analog chips sector, Goldman Sachs stated that Wall Street is underestimating the recovery slope, favoring companies with exposure to industrial, aerospace/defense, and data center sectors. Microchip Technology (MCHP.US) and NXP Semiconductors (NXPI.US) were highlighted, with target prices of $115 and $325, respectively. Texas Instruments (TXN.US) was maintained as a “Sell” due to high inventory levels and depreciation.
In memory, SanDisk (SNDK.US) received a “Buy” rating with a target price of $2,200, the highest on the list, due to tight supply and increased enterprise SSD penetration. Seagate Technology (STX.US) was also rated “Buy” with a target price of $960, while Western Digital (WDC.US) received a “Neutral” rating. Overall, Goldman Sachs issued “Buy” ratings for 12 stocks, forming the core basket of its semiconductor allocation.