Goldman Sachs: Tech De-Grossing Continues as Energy Collapse Drives Rotation
Markets are trading poorly into the US midterms, with the AI trade failing to hold an early rebound yesterday, despite a sharp pullback in energy. Gen AI fell around 5%, AI healthcare 4%, optical names 7.5% and neoclouds 6%, while high-momentum stocks dropped about 7%. In contrast, homebuilders, alternatives and value outperformed, suggesting the de-grossing cycle is still running, with crowded longs being cut and shorts continuing to squeeze higher. The move appears to reflect two main forces: fading support for the AI complex and a collapse in energy prices that is redirecting flows toward discretionary and retail. Apple added to the cautious tone after beating on the quarter but disappointing on the outlook, with the shares down around 3% after hours. December-quarter gross margin guidance of 45-46% reflected higher memory costs, while services growth guidance of 8-9% missed expectations, highlighting how AI demand is supporting memory pricing but also tightening component supply and pressuring margins elsewhere.
Markets are trading poorly into the US midterms, with the AI trade failing to hold an early rebound yesterday, despite a sharp pullback in energy. Gen AI fell around 5%, AI healthcare 4%, optical names 7.5% and neoclouds 6%, while high-momentum stocks dropped about 7%. In contrast, homebuilders, alternatives and value outperformed, suggesting the de-grossing cycle is still running, with crowded longs being cut and shorts continuing to squeeze higher. The move appears to reflect two main forces: fading support for the AI complex and a collapse in energy prices that is redirecting flows toward discretionary and retail.
Apple added to the cautious tone after beating on the quarter but disappointing on the outlook, with the shares down around 3% after hours. December-quarter gross margin guidance of 45-46% reflected higher memory costs, while services growth guidance of 8-9% missed expectations, highlighting how AI demand is supporting memory pricing but also tightening component supply and pressuring margins elsewhere.