Goldman Sachs: Buy on semiconductor pullbacks, but avoid buying the entire basket.

Goldman Sachs said in its latest report that semiconductor stocks still offer investment opportunities after a pullback, but trading in AI chips has entered a phase requiring more selective picking, warning investors against simply buying the entire sector. The bank noted that the PHLX Semiconductor Index has risen more than 80% so far this year, significantly outperforming the S&P 500 and Nasdaq indices. This strong performance has raised the bar for subsequent earnings delivery, and made the risk-reward outlook more divergent ahead of the second-quarter earnings season. Goldman Sachs remains bullish on select sub-sectors, including CPUs, ASICs, memory, and semiconductor equipment. The bank believes these areas benefit more directly from the expansion of AI infrastructure and have relatively higher demand visibility. For individual stocks, Goldman Sachs named AMD and Applied Materials: AMD gains from server CPU and AI-related demand, while Applied Materials stands to benefit from advanced process technologies and memory capital expenditures. However, Goldman Sachs is more cautious about the mobile supply chain, as well as some semiconductor firms with high valuations or weak demand.