Look, the AI trade was fun while it lasted. But lately, it’s been like watching your favorite band’s comeback album — promising at first, then kind of a letdown. Memory stocks are tanking, chip companies are stumbling, and everyone’s suddenly worried about whether Big Tech is actually making money on all those AI investments. (Spoiler: Goldman Sachs thinks they might not be.)
So where do you go when the hottest trade in town starts cooling off? Goldman Sachs analyst Ben Snider has some ideas, and they’re actually pretty interesting.
The momentum factor — basically the stocks that have been crushing it all year — is now getting crushed itself. It’s like the market’s version of a plot twist nobody asked for. The Momentum factor has erased all its gains since April, and its volatility is at record highs (outside of recessions, anyway). Meanwhile, the equal-weight S&P 500 keeps hitting new highs, and stock correlations have dropped to their lowest level in decades. Translation: the market’s getting weird, and that creates opportunities.
Snider and his team flagged three non-AI trades worth paying attention to:
1. Consumer Experience Stocks — Think casinos, hotels, cruise lines, and entertainment venues. These companies are riding strong secular growth in people spending money on experiences, and they’re trading at reasonable valuations. Plus, AI isn’t exactly threatening to replace your vacation.
2. Compounders — These are solid businesses with strong earnings growth, good returns on capital, and healthy balance sheets. They’ve just fallen out of favor lately and are trading at historically cheap valuations. It’s like finding a quality stock on sale.
3. M&A Candidates — Goldman’s equity analysts have identified companies that could be acquisition targets. Here’s the thing: M&A activity is surging, but these potential targets still aren’t priced for that reality. It’s a classic case of the market sleeping on something obvious.
The takeaway? The AI trade isn’t dead, but it’s definitely tired. And when the market’s hottest stocks start cooling, that’s usually when smart money starts looking elsewhere. Goldman’s three ideas aren’t flashy, but they might be exactly what your portfolio needs right now.
