LIVE MARKETS-Global tech rout a correction, not a bear market, Goldman Sachs says

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GLOBAL TECH ROUT A CORRECTION, NOT A BEAR MARKET, GOLDMAN SACHS SAYS

The noise around DeepSeek has forced investors to recalibrate their growth bets for big tech, especially those that have pumped hefty amounts into artificial intelligence infrastructure.

Goldman Sachs, however, says Monday's market selloff is a correction rather than the start of a sustained bear market, even as investors are questioning the future of the AI-driven run for equities.

The brokerage said their view is most bear markets are triggered by sinking profits on recession fears.

In fact, GS remains bullish on global economic growth, seeing a mere 15% chance of a U.S. recession in the next twelve months.

GS notes that equity markets began the year "priced for perfection," leaving them vulnerable to any signs of a setback.

Moreover, GS points to a disproportionate increase in the sky-high valuation of tech giants and the concentration of investments in U.S. equities since the fourth quarter of 2023, although they attribute this to superior business fundamentals, not irrational hype.

However, it cautions that inflated earnings growth for specific sectors like tech is on track to fade, which will leave more room for diversified investment strategies.

While they still see U.S. equities moving higher, earnings growth for the S&P 500 will likely fade as well, GS says.

They forecast the Magnificent 7 group of stocks to post 18% earnings growth this year, and 16% in 2026, compared to 33% in 2024.

GS also still sees attractive opportunities both within the U.S. and also in technology.

Though selling pressures have eased since, DeepSeek has shaken confidence in AI-driven growth. It remains to be seen how megacap tech companies justify their valuations, given the introduction of a cheaper AI alternative.

(Nikhil Sharma)

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FOR WEDNESDAY'S EARLIER LIVE MARKETS POSTS:

U.S. STOCKS SUBDUED IN EARLY TRADE AHEAD OF FED, BIG EARNINGS - CLICK HERE

BENCHMARK TREASURY YIELD ON THE BACK FOOT AHEAD OF THE FED - CLICK HERE

US STOCK ROTATION OR RECESSION? IT MATTERS FOR THE DOLLAR - CLICK HERE

IN FAVOUR OF A HIGHER US NEUTRAL RATE - CLICK HERE

EURO AREA GROWTH: ITALIAN EXCEPTIONALISM IS OVER - BOFA - CLICK HERE

TECH STRIKES BACK, LUXURY GOES BACK - CLICK HERE

BEFORE THE BELL: EUROPEAN FUTURES RISE, ASML POPS - CLICK HERE

TECH NERVES SETTLE JUST IN TIME FOR MAG 7 EARNINGS - CLICK HERE