The artificial intelligence trade has encountered significant challenges at the onset of 2026. However, analysts at Goldman Sachs indicate a potential rebound for major technology stocks adversely affected by a recent market rotation. The so-called “Magnificent Seven” stocks, which were once at the forefront of the AI movement, have now started to lag behind the broader S&P 500 index.
Despite the initial setbacks, Goldman Sachs predicts that the momentum in AI gains will begin to extend beyond these mega-cap companies. Analysts suggest that three key catalysts could ignite a resurgence for tech stalwarts like Meta, Microsoft, Amazon, and Alphabet in the latter half of the year.
First on the list is the potential for increased AI-related revenue growth. Companies that report rising revenues directly tied to AI initiatives could alleviate investor concerns about excessive spending in the sector. As Goldman noted, an uptick in AI revenues could bolster investors’ confidence in the long-term earnings potential of these major tech players. Recent earnings reports from Big Tech illustrate this notion; while all hyperscalers raised their capital expenditure forecasts, stock reactions varied. Notably, Microsoft experienced a decline due to disappointing cloud growth, Amazon’s share prices slipped following an inline sales forecast, while Meta’s stock surged on a positive revenue outlook linked to its advertising business.
The second driver cited by Goldman is the anticipated slowdown in AI capital expenditure growth. The firm believes that this growth is likely to peak in 2026 and then decelerate, enabling investors to more accurately evaluate companies’ earnings prospects. Presently, hyperscaler spending is projected to consume a staggering 92% of cash flows from operations, a ratio reminiscent of the dot-com bubble. A tapering of capital expenditure growth could provide clearer insights into free cash flows, better positioning investors to assess company value based on earnings rather than spending.
Lastly, analysts pointed out the recent rotation in the stock market from technology shares to cyclical stocks. This shift emerged amid growing apprehensions about AI’s ability to transform the global economy, overshadowing traditional tech leaders. Goldman Sachs economists foresee a transition in the macroeconomic environment from a period of accelerating growth to one of decelerating growth. Such a shift could prompt investors to explore opportunities among stocks aligned with secular growth rather than those broadly influenced by cyclical trends.
The firm’s economists project that the U.S. economy will experience growth in the first half of the year, which will primarily benefit cyclical sectors. However, they foresee this economic growth momentum peaking mid-year before decelerating in the latter half of 2026. Overall, the analysts maintain a cautiously optimistic view, highlighting these catalysts could pave the way for a rebound for the mega-cap tech stocks that have recently stumbled.
