NYSEGoldman Sachs sees three opportunities forming outside the AI trade.Investors have weathered a bruising sell-off in some of the hottest AI-linked names. The bank's Ben Snider flagged areas like consumer experience stocks and M&A candidates as AI alternatives. Where do investors go without the AI trade to help juice stock gains? Goldman Sachs has some ideas. The AI trade has carried the market again in 2026, but it's turned volatile lately. Memory stocks and the broader chip sector have stumbled, and issues like capex concerns and new competition from China have ground momentum trades to a halt. For investors rattled by the big reversal of fortunes in high-flying stocks, Goldman Sachs' Ben Snider sees an opportunity to pivot."We highlight three investment ideas that are unrelated to AI and trading with minimal correlation to our AI baskets or the Momentum factor," he wrote in a note on July 17. The analysts flagged "consumer experience stocks, compounders, and M&A candidates" as areas investors should consider amid the rotation. The investment bank has been eyeing non-AI trades during other market rotations, touting the strength of the HALO trade and highlighting sectors like utilities, energy, and telecommunications.On Goldman's radar now is the breakdown of the market's momentum factor, as the stocks with the strongest gains this year now see the sharpest pullbacks. "The plunging Momentum factor has erased its gains since the end of April as its volatility has surged to the highest level on record outside of recessions," Snider added. "Meanwhile, the equal-weight S&P 500 continues to make new highs, and correlations across S&P 500 stocks have dropped to the lowest level in decades."As AI volatility persists, Snider and his team see opportunities in three non-AI trades that may be under-appreciated by investors."Consumer experience stocks, which offer exposure to strong secular growth in consumer spending on experiences at undemanding valuations with limited AI disruption risk.Compounders that have strong earnings growth, returns on capital, balance sheets, and free cash flow conversion but have recently lagged and now trade at a historically large valuation discount.M&A candidates, identified by GS equity analysts, which do not appear to have priced the ongoing surge in M&A activity."Other commentary has flagged consumer experience stocks recently, too. Citrini Research named the sector as one of its top picks as market winners get reshuffled. Snider pointed to Goldman's consumer experience basket's strong performance, which includes entertainment facilities, casinos, hotels, resorts, and cruise lines.Goldman SachsMeanwhile, the analysts also see significant potential in the "compounders" category. This refers to companies with strong businesses fundamentals whose stocks have still fallen out of favor with Wall Street as they struggle to catch up to the broader market. In Goldman's view, this represents a clear opportunity to acquire winners at low valuations.Finally, the bank pointed to strong M&A activity, which his team says could make target firms significantly more valuable. However, his team maintains that most of these companies are still underpriced."A group of stocks identified by GS equity analysts as potential M&A targets has outperformed the equal-weight S&P 1500 by 8 pp since the end of Q1, but valuations do not reflect an above-average premium for the likelihood of acquisition despite the increase in M&A activity," Snider said.Read the original article on Business Insider
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