The AI trade has had a rocky start to 2026, but Goldman Sachs says mega-cap tech stocks that have been hurt by the market rotation could see a turnaround later in the year.
The Magnificent Seven stocks went from carrying the AI trade to lagging the S&P 500. Goldman expects AI gains to continue broadening from the mega-cap names, but the analysts outline three catalysts that could revive Meta, Microsoft, Amazon, and Alphabet’s market leadership in the second half of 2026.
“Hyperscaler return dispersion should continue in the near-term, but we see three catalysts for a potential inflection later this year,” the analysts said.
Here are three drivers of a potential turnaround for mega-cap laggards that Goldman is eyeing this year.
1. AI revenue growth picks up
Companies reporting increasing revenue tied to AI will ease concerns about overspending.
“An acceleration in AI-related revenues would support investor belief in the eventual return on ongoing investment spending and the long-term earnings potential of the hyperscalers,” the analysts said.
They added that AI-related revenue growth would offer investors visibility into the pathway to AI monetization, showing that colossal spending is justified.
Goldman says that the latest round of Big Tech earnings demonstrates this idea. All hyperscalers lifted their capital expenditure outlooks, but share prices didn’t have a uniform reaction.
Microsoft fell on weak cloud growth and Amazon dropped on its inline sales guide, while Meta popped on its strong revenue outlook and robust revenue in its ad business.
2. AI spending growth slows
Goldman expects AI capex growth to peak in 2026 and then decelerate, allowing investors to better assess companies’ earnings potential.
Hyperscaler spending is on pace to make up 92% of cash flows from operations, above the rate seen in the dot com bubble.
“A deceleration in capex growth would offer line of sight to a trough in free cash flows, which would help investors value these companies on an earnings basis again,” the analysts said.
3. Cyclical stocks lose steam
The stock market has seen a rotation from tech stocks into cyclical names, with recent fears about AI transforming the global economy have dethroning legacy tech leaders.
“A shift in the macroeconomic backdrop from accelerating growth to decelerating growth should push investors to look for opportunities among secular growth stocks,” the analysts said.
Goldman economists expect the US economy to grow in the first half of the year, supporting cyclical stocks that generally aren’t tied to AI. They expect economic growth tailwinds to peak mid-year and slow down in the second half 2026.