Goldman Sachs says it’s keeping a close watch on one stock group that’s being overshadowed by red-hot semiconductor names.
The News
In a new episode of the bank’s This Is the Markets podcast, Goldman’s TMT specialist, Peter Callahan, says the Nasdaq’s 20% run over the last three months is being fueled by a narrow group of stocks, with semiconductors doing the heavy lifting.
“When you look under the hood, only about half of the stocks in the Nasdaq are even up at all over that stretch. So you have narrow breadth again led by semiconductors, which are up nearly 80% this year, the best year since 1999. Second, high velocity in the Nasdaq is off to its second-best start to a year in over 25 years. And so we’ve had a really rapid rise this year in tech stock prices.”
While Callahan says semiconductors look incredibly bullish, he notes one stock group that’s been sold off over the past few months could be the next to ignite rallies.
“One group we haven’t talked about yet is US Internet. The group, the way I cut the data, is about lagged software on the year, which is probably surprising to people. There are ongoing debates about sources of funds, about ongoing investment cycles, about the health of the consumer, and, of course, where AI and the consumer world go over the next couple of years. But as of late, you’re starting to see a little bit more innovation from the product side on US Internet companies tied to AI. The temperature on the consumer seems to be coming down as oil prices have reset off the highs. And so given that backdrop and cleaner positioning, I’ll be watching the US Internet sector from here.”
What It Means for Investors
The US Internet subsector consists of companies that make money as businesses and individuals use the internet, such as Alphabet (GOOGL), Meta (META), Amazon (AMZN), Shopify (SHOP) and Cloudflare (NET).
Callahan is correct to point out that these names have “cleaner positioning,” which means investors have either sold off or trimmed their exposure. For instance, META is down 11% year-to-date and SHOP has decreased about 27% over the same period.
Meanwhile, GOOGL is up a decent 20% this year, and AMZN has increased by 17%. While these figures are strong, they pale in comparison to the gains made by semiconductors, such as Micron (MU), Intel (INTC) and On Semiconductor (ON), which are up between 116% and 226% so far this year.
Flows from the biggest institutional names also support Callahan’s “cleaner positioning” claim. In Q1 of this year, Warren Buffett’s Berkshire Hathaway dumped 100% of its stake in Amazon, billionaire Rob Citrone fully exited Meta and Brad Gerstner’s tech-focused fund Altimeter unloaded all of its positions in Alphabet.
Even though investors are extremely bullish on semiconductors, Callahan highlights that US Internet companies are making progress on the product side with AI, a statement that could have been easily overlooked.
According to eMarketer, Meta is poised to surpass Alphabet in digital ad revenues this year. The firm projects Meta to hit $243.46 billion in net worldwide ad revenue in 2026, compared with Alphabet’s estimated $239.54 billion and Amazon’s $82.07 billion. eMarketer notes that Meta’s ad revenue growth will be driven by multiple tools, including AI-generated ad creatives.
While Meta may take the lead this year, all three platforms are showing steep ad revenue growth annually.
Shopify is also benefiting from AI after the company reported $3.17 billion in Q1 revenue, marking the 12th straight quarter of +25% year-over-year revenue growth. President Harley Finkelstein said during the Q1 earnings call that “AI is now Shopify’s native language” as the company pushes for agentic commerce activity.
Overall, even the most bullish stocks don’t go up in a straight line. While investors often say to let the winners run, high-flying semiconductor names will likely witness dips and consolidations as savvy investors lock in gains. Callahan believes that US Internet stocks are worth watching at this juncture, signaling that the fundamentals are present for them to lead the next stage of the tech bull run.
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