Goldman Sachs has highlighted the challenge investors face in finding stocks that are not influenced by the current AI boom, which has propelled the S&P 500 and Nasdaq Composite to record highs. In a report dated May 15, the firm's chief U.S. equity strategist noted that many investors perceive the market as a single trade rather than a diverse collection of stocks.
To navigate this, Goldman recommends focusing on equities with solid earnings growth, regardless of whether they are linked to AI. The report features a selection of Russell 1000 stocks that exhibit low price sensitivity to both the AI trade and broader economic growth.
For instance, Eli Lilly has seen only 9% of its returns attributed to the U.S. economic outlook and AI, with Morgan Stanley maintaining an overweight rating and a price target of $1,344, suggesting a potential upside of 26.2%. In contrast, cybersecurity firm Fortinet has surged 68.7% this year, with 19% of its returns tied to AI and economic factors.
BTIG recently upgraded Fortinet to buy, citing a significant earnings beat. Meanwhile, Chewy's stock has dropped 37% this year, with only 11% of its returns linked to AI and economic conditions. Wolfe Research views Chewy as a top pick, setting a price target of $39, nearly double its current price of $20.73.
This analysis underscores the importance of identifying stocks with fundamental support as the market dynamics shift