<p>Since the beginning of this year, US tech stocks have been fluctuating upwards, with the Nasdaq 100 index alternating between gains and losses for 7 consecutive trading days, showing signs of stabilization.</p>
<p>This week, tech stocks will also see many catalysts: the US September CPI, Tesla's robotaxi day, AMD's Advancing AI conference, etc. What will be the future trend? Goldman Sachs' top tech strategist Peter Callahan recently released a research report answering ten questions that investors are focusing on.</p>
<h2>Q1: What caused Microsoft's stock price to slump?</h2>
<p>Microsoft's cumulative increase since the beginning of the year slightly exceeds 10%, ranking second to last in the Mag 7; in the past 11 trading days, Microsoft's stock price has fallen on 9 trading days.</p>
<p>Callahan believes that the &#34;best&#34; explanation for Microsoft's lackluster performance is that <strong>the company's earnings per share have not been revised upwards in the past few quarters.</strong> This is mainly due to:</p>
<blockquote>
<ol>
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<p>Concerns from investors due to the stagnation in Azure cloud business growth;</p>
</li>
<li>
<p>The company lowering its guidance for the revenue growth rate of the Intelligent Cloud business for fiscal year 2025;</p>
</li>
<li>
<p>Investors reevaluating the prospects of copilot application.</p>
</li>
</ol>
</blockquote>
<h2>Q2: Are investors more inclined towards vertical growth stocks?</h2>
<p>With growth stocks finding it difficult to sustain valuations, a broader range of horizontal growth stocks are showing weakness. Currently, investors seem to be more inclined towards industry-leading vertical growth stocks.</p>
<p>Generally, horizontal growth stocks refer to companies with a wider scope, while vertical growth stocks are companies that focus deeply on a specific vertical sector.</p>
<p>The research report suggests that the performance differentiation of growth stock assets has always been a focus for investors. In fact, <strong>the EV/FCF premium of vertical growth stocks is currently about 10 times higher than that of horizontal growth stocks,</strong> mainly due to the market valuing their proprietary data moats and sector specificity.</p>
<h2>Q3: Why has Salesforce's stock outperformed Workday?</h2>
<p>In the past month, Salesforce's cumulative increase has been over 20% higher than Workday's.</p>
<p><img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/4a0295b8-31f9-4038-a2da-7e91a7dc4bdd.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/4a0295b8-31f9-4038-a2da-7e91a7dc4bdd.png"/></p>
<p>Goldman Sachs points out that besides the &#34;positioning&#34; factor, <strong>the price difference between the two is more driven by &#34;narrative&#34; rather than fundamentals.</strong></p>
<p>The report states that Salesforce is increasingly shifting towards a &#34;Agents&#34; product cycle, which may see significant growth in the fiscal year 2025 and beyond. Analysis shows that Workday's forward P/E ratio is only 3 times that of Salesforce, indicating strong market optimism towards the latter.</p>
<h2>Q4: Will there be changes in Mag 7 by 2025?</h2>
<p>The report indicates that although the profit prospects of Mag 7 remain stable, <strong>confidence in some of the companies within it is still not fully established.</strong></p>
<p>This mainly includes: Microsoft (lack of earnings per share revision drive), Apple (valuation will be more reasonable a year after the catalyst of iPhone 17), NVIDIA (investor concerns about stock price peaking), Google (regulatory concerns and potential risks driven by AI)</p>
<h2>Q5: How long will the market's &#34;low volatility&#34; or &#34;defensive&#34; rotation last?</h2>
<p>Callahan believes that although the market is full of uncertainties, the key lies in whether investors believe the market will shift to a cyclical market.</p>
<p>The report indicates that considering the overall positive trend of the data, <strong>from now until the election, it is necessary to be more vigilant than usual against various squeezing factors</strong>, but things may return to normal afterwards. However, Callahan also adds that everything still depends on economic data.</p>
<h2>Q6: How do you view the rise of A-shares and Chinese internet stocks?</h2>
<p>The report states that currently, many investors still prefer to adopt a wait-and-see attitude, which has not yet affected the inflow of funds into the US stock market's large-cap technology stocks.</p>
<p>However, related data shows that the current rise of A-shares has pushed the forward P/E ratio of the MSCI China Index to 11.3 times. With continuous policy efforts, valuations may expand to 12 times, implying a total return potential of 15-18%.</p>
<h2>Q7: Will NVIDIA and the AI theme continue to be hot?</h2>
<p>Since the summer, changes in investor sentiment and positioning regarding semiconductor and AI themes have been widely discussed.</p>
<p>Goldman Sachs believes that from now until the end of 2024 or 2025, semiconductor/AI companies are worth close attention from the market. Considering that investors' positioning is clearer now and the market background is more favorable (global central banks entering an easing cycle, widespread recovery of data centers, strong investment in AI, etc.), <strong>for these companies, the current market environment may be as favorable as it was in June 2024, or even better.</strong></p>
<h2>Q8: Why is Live Nation Entertainment performing well?</h2>
<p>The research report points out that recently, the performance of industry-leading companies has been quite good, such as Duolingo, Netflix, and others.</p>
<p>Furthermore, the optimism towards Live Nation is partly attributed to the uniqueness of its products, such as the scarcity of artist tours, which may lead to higher consumer demand for their products.</p>
<h2>Q9: How do you view the upside potential of top internet companies like Netflix, Meta, and Duolingo?</h2>
<p>Goldman Sachs believes that the market is rewarding the scarcity of &#34;clean growth&#34; (referring to sustainable and environmentally friendly growth) and is shifting towards evaluating companies from the framework of the 2026 fiscal year.</p>
<p>From this perspective, it is difficult to find investors with too many negative views on these top internet companies. However, considering that the market environment will become more complex starting in the fourth quarter (including geopolitical risks, the Christmas holiday season, the US election, etc.), discussions around these companies will begin to diverge.</p>
<p>Callahan believes that <strong>if a company's financial report is released close to the election time, it may limit the momentum of the stock price rising after the financial report is disclosed.</strong></p>
<h2>Q10: How to trade cyclical stocks around earnings?</h2>
<p>Callahan believes that <strong>given the &#34;buy on rate cuts&#34; trading strategy and the continuous improvement in the macro background mentioned above, trading bearish cyclical stocks may become more challenging.</strong></p>

<p>Goldman Sachs trader Peter Callahan said that investors are currently more inclined towards leading growth stocks in the industry. The earnings prospects of the Mag 7 are stabilizing but still have uncertainties, while chip stocks/AI stocks are experiencing an equally good or even better market environment than in June this year</p>

- The U.S. tech stocks have shown signs of stabilization, with the Nasdaq 100 index alternating gains and losses over the past seven trading days.  
- Goldman Sachs' Peter Callahan addressed ten investor questions, highlighting concerns over Microsoft's stagnant earnings and the preference for vertical growth stocks over horizontal ones.  
- The report suggests that while the market remains uncertain, there is potential for significant returns in sectors like semiconductors and AI, driven by favorable macroeconomic conditions.

Where to go for US tech stocks? Goldman Sachs' top trader: Not completely confident in the Mag 7, but optimistic about AI storytelling