Goldman sees oversold chips as a buy, flags Chinese internet names

Semiconductor stocks have fallen further relative to the wider US market than at any point in the past decade, and Goldman Sachs argues the move is overdone and creates a buying opportunity, according to BusinessLine. The investment bank said the SOX semiconductor index’s relative decline against the S&P 500 is approaching 30 points, well beyond earlier episodes when the gap crossed 20 points.

Goldman said periods of such steep underperformance have typically been followed by stretches of outperformance. It added that few catalysts exist for the stocks to climb before year-end, but still described the risk-reward balance as compelling for selected names, as reported by BusinessLine.

Also read: Chip Stocks Sink, Nasdaq Falls 5.5% in Worst Day Since April 2025

Key facts

• Goldman Sachs called semiconductors “clearly in oversold territory” and said the recent correction could be a good entry point at the index level.
• The bank estimates AI infrastructure investment near USD 1.3 trillion in 2027, a 60% year-on-year rise, and USD 2 trillion in 2028, up 42%.
• AI-dedicated data centre deployments are projected to grow from roughly 20 GW in 2026 to 35 GW in 2027 and 57 GW in 2028.
• A separate Goldman note, reported by Blockonomi, names Tencent, Alibaba, PDD Holdings, Meituan and JD.com ahead of third-quarter results and projects about 9% combined net profit growth for major Chinese internet firms.
• Blockonomi reported JD.com’s earnings on November 17, Tencent’s on November 18 and Alibaba’s on November 19.

The two concerns hanging over chip demand

Goldman flagged two uncertainties for the sector: the funding gap between capital expenditure and free cash flow at hyperscalers and AI model developers, and whether enough land, power and construction capacity exists to support the planned build-out. It nonetheless expects AI infrastructure spending to stay strong, and counts spending by AI laboratories, sovereign AI programmes and corporate customers alongside the traditional capital expenditure of large technology companies.

The bank regards the 35 GW of data centre additions planned for 2027 as relatively low-risk. For 2028 it sees at least another 35 GW as carrying low execution risk, with deployments potentially reaching 55-60 GW if projects go ahead. Land, electricity and construction capacity remain the constraints that could slow the pace, and therefore chip demand.

Also read: TSMC Posts Record Q3 Profit, Guides Q4 Revenue to $54.3B

Goldman also said valuations across large-cap AI computing, memory and semiconductor capital-equipment names could stay sensitive to downside scenarios while investors weigh how quickly future infrastructure is funded.

Chinese internet names ahead of results

In a separate note published November 10, Goldman picked five Chinese internet stocks to watch before third-quarter earnings. Blockonomi reported the bank expects combined net profit at major Chinese internet companies to rise about 9% from a year earlier, after declines in the two prior quarters. Goldman favours gaming and entertainment names as more defensive than e-commerce, advertising and local services while Chinese consumer spending stays weak.

By company, Blockonomi reported that Goldman forecasts Meituan’s adjusted operating profit up 104% to about 700 million yuan, JD.com group net profit up 39% to about 8 billion yuan, Tencent gaming revenue up 8% and advertising revenue up 19%, and Alibaba cloud revenue growth accelerating to 53% with adjusted EBITDA up 238% to about 31 billion yuan. The bank kept Tencent’s 12-month price target at HK$650 while cutting the valuation multiple on its gaming unit from 20 times to 19 times earnings, per Blockonomi. It expects near-term earnings pressure at PDD Holdings despite its net cash and free cash flow.

Why it matters

The two notes show Goldman taking a selective stance rather than a blanket bullish one: buy chip stocks after a historic relative slump, and favour defensive gaming over consumer-facing e-commerce in China. For investors, the chip call rests on AI spending forecasts rather than near-term catalysts, which the bank concedes are thin before year-end. The Chinese internet forecasts are estimates, not reported results, and will be tested when the companies publish.

What to watch

The earnings dates are the near-term yardsticks: JD.com on November 17, Tencent on November 18 and Alibaba on November 19. On the chip side, watch whether hyperscaler capital spending and data centre construction keep pace with the 2027 and 2028 projections.

This is not financial advice. Markets are volatile and forecasts may not materialise.

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StockPil Editorial

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Sources: BusinessLine, Blockonomi