According to Goldman Sachs the AI infrastructure spending will remain strong despite concerns reaching $1.3 trillion in 2027 and $2 trillion in 2028.
With an unprecedented decadal drawdown of 30 points in the semiconductor index (SOX), relative to the S&P 500, Goldman Sachs expects the decline to be excessive, providing buying opportunity for investors. This decline is higher than previous instances where relative fall reached 20 points.
Stated in a report, the multinational brokerage firm expects the sector to recover despite uncertainties over artificial intelligence (AI) spending. Goldman Sachs believes that the AI infrastructure spending will remain strong despite concerns reaching $1.3 trillion in 2027 and $2 trillion in 2028. Data centre deployments serving AI are expected to increase from 20 GW in 2026, to 35 GW in 2027 to 57 GW in 2028. These deployments according to Goldman have a low execution risk.
The report points to two major uncertainties looming on semiconductor stocks. First is the funding gap between capital expenditure and free cash flows among hyperscalers and AI model developers. Second is the availability of land, power and data centre construction capacity to support the expansion.
The investment firm stated that there may not be enough triggers for rise in semiconductor stocks before the end of the year but the risk-reward balance for selected stocks looks compelling even after the correction at current levels. Valuations across large-cap AI computing, memory and semiconductor equipment companies possess some downside risks.
