Goldman Sachs sounds the alarm on Nvidia and the Magnificent 7
Nasdaq 100 rallies are to be sold, according to strategists at Goldman Sachs.
Ever since DeepSeek roiled markets, the AI trade vibes have oscillated between “it’s so over” and “we’re so back.”
Put Goldman Sachs firmly in the former camp amid another dreadful session in which Nvidia is down as much as 7%.
In a flurry of notes released late last week and over the weekend, strategists at the bank basically said that the party’s over for the megacap US tech trade. To sum up their case:
When a stock fails to respond to good news, that’s bad news.
The earnings growth that made the Magnificent 7 so magnificent isn’t as magnificent any more.
Hedge funds are dumping the cohort and other AI-linked positions.
Popular stocks could see a lot more of a valuation reset lower.
The strategists, in their own words:
Paolo Schiavone:
“The NVDA print was a clearing event — the reality is that from here the AI theme is for sale. In AI, investors are worried about 2026 growth not 25. Nasdaq 100 rallies will be used as liquidity events.”
Tony Pasquariello:
“We all knew it was coming, but the immense earning premium that you had earned in US mega cap tech vs everything else is narrowing. DeepSeek triggered a shift in the flow [of] capital away from the US plays. In a few ways, NVDA earnings are an illustration of what’s going on here: they didn’t pull a hamstring as the cyclical impulse to spend on compute is still clearly intact, but price action told a certain story (i.e. -$320 billion of market cap in one day). Bigger picture, the stock has been range bound for the past eight months — coming off a 24,000% cumulative return in the prior ten years, if nothing else that’s anti-climactic.”
John Flood:
“February’s notional de-grossing in US TMT [technology, media, and telecom] is tracking to be the second largest on our record (behind January 2021 amid the meme stocks rally). Net exposure to Mag7 names has continued to fall and is now at the lowest level since April 2023, and aggregate long-short ratio across our US TMT AI basket constituents remains well below the highs seen around the middle of last year.”
Mark Wilson:
“To my starting comment about price action sometimes revealing more than fundamentals — these 3 ‘head check’ charts of the largest index constituents give a reasonable frame of reference for price possibilities from here: Nvidia, Apple & Amazon’s EV to 12-month trailing sales multiple: it’s not a uniform observation (i.e. AMZN has no dramatically re-rated), but its not unreasonable to suggest some very large stocks may consolidate after the moves they’ve had, in price & in multiple re-rating.”
