So the AI trade finally hit a speed bump. Shocking, I know. After carrying the market like a pack mule all year, memory stocks and chip companies decided to take a collective nap. Turns out, when everyone’s betting on the same horse, that horse eventually stumbles—especially when China decides to join the race.
Goldman Sachs’ Ben Snider just dropped a memo that basically says: “Hey, there’s life beyond AI.” And honestly? He’s onto something.
The momentum factor—that thing that made the hottest stocks even hotter—just erased all its gains since April. Its volatility hit record highs outside of recessions. Translation: the market’s getting weird, and investors are getting nervous. Meanwhile, the equal-weight S&P 500 keeps hitting new highs, and stock correlations have dropped to their lowest level in decades. It’s like watching a party where everyone suddenly stopped dancing to the same song.
Here’s where Snider sees the real opportunities hiding:
First up: Consumer Experience Stocks
Think casinos, hotels, cruise lines, entertainment venues. These aren’t sexy like AI chips, but they’re printing money. People are spending on experiences—concerts, vacations, the works—and these stocks offer solid growth at reasonable prices. Plus, there’s basically zero AI disruption risk. A robot isn’t going to replace your Vegas weekend anytime soon.
Second: Compounders
These are the boring-but-brilliant companies with strong earnings growth, solid returns on capital, and fat free cash flows. They’ve been left in the dust while everyone chased AI, so they’re trading at historically cheap valuations. It’s like finding a quality used car at a garage sale price. These are the kinds of businesses that quietly make you rich over time.
Third: M&A Targets
Goldman’s analysts have identified a bunch of companies that look ripe for acquisition. Here’s the kicker: even though M&A activity is surging, these potential targets still aren’t priced for the premium they’d command in a deal. It’s a classic case of the market sleeping on something obvious.
The Bigger Picture
What’s really happening here is a rotation. The stocks that went absolutely bonkers this year—your Magnificent Seven types—are now seeing the sharpest pullbacks. It’s not a crash; it’s a rebalancing. And while everyone’s panicking about AI volatility, there are entire sectors trading at discounts that would make value investors weep with joy.
The consumer experience basket Goldman highlighted has been crushing it, outperforming the equal-weight S&P 500 and broader benchmarks. Compounders are sitting there at valuations that don’t reflect their quality. And M&A targets are basically free money if you know what to look for.
The lesson? When the crowd runs one direction, the real opportunities are usually in the other direction. The AI trade isn’t dead—it’s just taking a breather. And while it catches its breath, there’s a whole market full of underappreciated winners waiting for investors smart enough to look beyond the hype.
