Goldman says tech rally is driven by earnings, not valuations

Goldman’s technology specialists are not treating the latest internet-stock surge as a simple momentum trade. Pete Callahan, Goldman Sachs’ U.S. technology, media and telecommunications sector specialist, said the rally off the March 30 lows has been marked by narrow breadth and high velocity, but its foundation has been earnings growth and earnings revisions rather than a straight-up expansion in valuations.

That distinction matters inside Goldman’s client coverage machine. Salespeople fielding questions from hedge funds and long-only managers, and bankers pitching to companies that live inside the crowded tech trade, now have to separate names with real fundamental support from names simply lifted by the index. Callahan said the Nasdaq had risen 20% over the prior three months, yet only about half of Nasdaq stocks were higher over that stretch. He also said semiconductors were up nearly 80% year to date, their best year since 1990.

The same pattern shows up in artificial intelligence stocks. Callahan said AI names within the S&P 500 were up about 30% this year, and earnings were also up about 30%, a combination that suggests multiples have been restrained by stronger revisions rather than pure speculation. For Goldman’s research and trading clients, that is the key message: the market has not been rising on hope alone, but the breadth is still thin enough that stock selection matters more than ever.

Goldman Sachs Research reinforced that view in its broader market outlook released the same day. The firm raised its year-end 2026 S&P 500 forecast to 8,000 from 7,600, projected 2026 S&P 500 earnings per share at $340 for 24% growth, and 2027 EPS at $385 for 13% growth. It said AI-infrastructure beneficiaries should account for roughly half of total S&P 500 earnings growth in 2026, while consensus estimates put hyperscale tech capex at $754 billion in 2026 and $905 billion in 2027. Semiconductor companies remain the clearest direct winners from that spending cycle.

A separate Nasdaq market review on June 1 added more fuel to the argument. It said the PHLX Semiconductor Index logged its best two-month gain since inception in June 1996, while the Nasdaq 100 rose 10.6% in May and the Nasdaq Composite gained 8.9%. Earnings revisions continued to trend higher.

For Goldman employees, the message is practical: the next leg of the tech trade will not be won by chasing the strongest chart alone. It will be won by identifying which platform, ad-tech, ecommerce and software-adjacent internet names can still translate AI spending and profit revisions into durable cash flow.