TLDR
- Goldman Sachs analyst James Schneider calls chip stocks oversold and names Nvidia, Broadcom and AMD as top picks.
- The Philadelphia Semiconductor Index fell 21% in a month, with a 11% intraday drop on November 5.
- Goldman says Nvidia and Broadcom trade near 12 and 13 times earnings even with no 2028 growth.
- Wells Fargo upgraded its view on US AI infrastructure to neutral on November 10.
- Nvidia reports quarterly earnings on November 17.
Goldman Sachs says the recent drop in chip stocks has gone too far. Analyst James Schneider called the sector oversold in a report covered by Yahoo Finance on November 10. He named Nvidia, Broadcom and Advanced Micro Devices as three preferred picks.
Schneider also said the sector may struggle to find a clear catalyst before the end of 2026. In other words, a quick rebound is not guaranteed. The bank’s argument rests on price rather than timing.
Why Goldman Likes the Prices
Goldman looked at what the stocks would be worth if growth stopped. Even with no earnings growth in 2028, the bank estimates Nvidia trades at about 12 times earnings. Broadcom trades at about 13 times.
Goldman views those levels as low. It also believes a full halt in growth is unlikely. The bank pointed to Nvidia’s role as the top supplier of chips used to train and run AI systems.
Broadcom offers a different angle. It makes custom AI chips and networking gear used by large cloud providers. Both firms could gain if those providers keep building AI data centers.
Goldman also picked AMD, but Schneider said its valuation is less appealing. The bank sees growth potential as demand rises for other AI processors and server chips.
How the Selloff Unfolded
The call follows a sharp drop in tech shares. On November 5, the S&P 500 fell about 4.3%. That wiped out nearly $3 trillion in market value.
The Dow Jones Industrial Average lost roughly 1,800 points that day. The Nasdaq Composite dropped 5.5%. Chip stocks were among the hardest hit.
Reuters reported that the Philadelphia Semiconductor Index fell as much as 11% during the session. That was its sharpest intraday drop since March 2020. The index is down about 21% over the past month.
Investors are asking whether huge AI spending plans can pay off. The November 3 US midterm elections added to the doubt. Some worry about limits on new data center projects.
Goldman named two main challenges. One is paying for the gap between AI spending and available cash flow. The other is finding enough land, power and construction capacity for planned sites.
Other Banks Weigh In
Goldman is not the only firm to see value after the drop. Wells Fargo raised its view on US AI infrastructure companies from negative to neutral on November 10. It said chip shares are down about 38% from their June highs.
Wells Fargo estimates current prices imply yearly earnings growth of about 8%. The bank also warned that slower AI spending and rising depreciation costs could hurt 2028 earnings.
Morgan Stanley and UBS said fears about new rules after the midterms may be overdone. They believe tighter rules could delay some data center projects instead of ending them.
Analysts expect Nvidia’s data center revenue to rise more than 12% from the prior quarter. The company reports earnings on November 17.
