Monday's trillion-dollar stock-market wipeout will be remembered as an opportunity to scoop up shares of some of the most valuable U.S. companies at a discount, according to a team of equity strategists at Goldman Sachs Group.
In a report shared with MarketWatch on Wednesday, the Goldman team, led by chief global equity strategist Peter Oppenheimer, said that while the buzz surrounding China's DeepSeek has raised questions about Big Tech's AI investment binge, the fundamentals underpinning stocks' lofty valuations haven't changed.
That means the latest correction in Big Tech names, the first since the fall, will likely remain just that - a correction. Not the start of a new bear market.
"In our view this is a correction and not the start of a sustained bear market," the Goldman team said in a report shared with MarketWatch.
"Most bear markets are triggered by expectations of falling profits driven by fears of recession. Our economists remain confident about world growth and remain above consensus on their forecasts for the US, putting the probability of recession in the next 12 months at 15%."
Valuations
The Goldman team acknowledged that U.S. stocks look particularly expensive right now. Both relative to history, and relative to their international peers.
But these lofty valuations are justified by expectations for strong earnings growth in the U.S. Big Tech companies, most notably Nvidia Corp. $(NVDA)$, have seen their profits soar over the past couple of years.
Now, other U.S. firms are expected to narrow that gap in 2025, as Goldman pointed out.
While Big Tech stocks have helped skew valuations higher, most large-cap U.S. stocks look expensive relative to history.
"The dominance of [the] U.S. equity market, technology sector, and dominant companies, do not represent a bubble based on irrational exuberance but are rather a reflection of superior fundamentals," the Goldman team said.
After sliding on Monday, Nvidia and the broader U.S. technology sector came roaring back on Tuesday. But shares of the AI darling were trading lower once again on Wednesday, weighing on the S&P 500 and Nasdaq Composite.
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