Goldman Sachs Updates Conviction List: Focusing on AI CapEx and Talent Drivers
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Goldman Sachs Updates Conviction List: Focusing on AI CapEx and Talent Drivers
Goldman Sachs adds TGS and Halma to the Conviction List, emphasizing the AI-driven capital expenditure boom and the critical role of talent, while warning of the impact of Chinese competition on European markets.
- Added TGS and Halma to the Conviction List; bullish on the former due to expected capex recovery after oil price stabilization, latter viewed as a high-quality growth compounding engine.
- AI and data centers are the core drivers of capital expenditure; beneficiaries include Schneider Electric, Siemens Energy, etc.
- Talent is the key bottleneck for AI development; Europe lags behind the US in AI talent reserves.
- Chinese companies continue to expand market share in Europe; automotive, medtech, and other industries face fierce competition.
- Raised TSMC target price to 3000 NTD, reiterating Buy; Raised ASML target price by 13%.
Report interpretation
Overview
This report is a periodic view summary from Goldman Sachs Global Investment Research, aiming to 'Connect Points' and sort out current core market logic. The report focuses on updating the 'Conviction List', adding two new stocks, TGS and Halma, and deeply analyzing the wave of AI-driven capital expenditure, the talent bottleneck in AI development, and the competitive landscape of Chinese companies in the European market. The report covers the latest research views and rating adjustments across multiple sectors including semiconductors, industrials, energy, consumption, and healthcare.
Core views
Conviction List Update and Capital Expenditure Theme: Goldman Sachs added TGS to the Conviction List, believing that despite downside risks to oil prices, as long as oil remains above $60/barrel, capital expenditure will return with declining shale oil reserve life in the US and demand for mature field development. Simultaneously added Halma, viewing it as a high-quality, high-return growth compounder; its niche products in highly regulated markets grant strong pricing power, and M&A activity continues to support growth. The report points out that AI and its derivative areas are key drivers of capital expenditure. There are six stocks on the European Conviction List related to this, including Schneider Electric, Siemens Energy, and Ceres Power, which benefit from electrification, data centers, and power bottlenecks. AI Drivers: Talent is Key: The report emphasizes that although there is concern that AI causes unemployment, the current trend is reinvestment in talent and frontline capabilities. The Evident AI Index shows talent accounts for 45% of AI maturity metrics; Europe's shallower AI talent pool is one of the main reasons it lags behind the US. Differences in culture and management focus among companies will lead to divergence in AI outcomes, which may exceed the scope currently captured by AI basket stocks. Chinese Competition and European Market: The report warns that Chinese companies are抢占 (seizing) European market share at an unprecedented pace, mainly due to weak domestic demand in China, cost advantages, and undervalued exchange rates. Goldman Sachs' China Competition Basket (GSXECHNX) performance continues to lag. Industries most affected include automotive, medical technology, chemicals, and some industrial goods. Although Europe attempts to raise trade barriers, this takes time. Key Stock Views: Semiconductors: Reiterated Buy rating on TSMC, target price raised to 3000 NTD to accelerate capacity construction and ensure growth trajectory; Raised ASML target price by 13% to imply 43x 2027 P/E, reflecting improved memory capex prospects. Industrials: Schneider Electric announced acquisition of Cognite, strengthening industrial data and AI software capabilities; Infineon Dresden factory capacity ramp-up will benefit from short-term AI power demand. Energy: Positive outlook on RWE and Naturgy regarding grid and capital allocation potential. Consumption: Zalando expects Q2 revenue growth of 23%, Haleon organic sales growth met expectations.
Analysis framework
The report adopts a methodology combining thematic investment and bottom-up stock selection. First, core trends (such as AI capex and geopolitical competition) are identified through macro and cross-industry perspectives, then mapped to specific industries and individual stocks. In analyzing AI impact, attention is paid not only to hardware capex but also deeply explores talent as a soft driver. When evaluating European companies, "Chinese Competition" is introduced as a key risk factor, adjusting investment views by tracking changes in market share. For individual stocks, comprehensive evaluation is conducted combining financial forecasts, valuation multiples (such as PE, EV/Sales), and specific events (such as M&A, capacity expansion).
Methodology notes
Supply chain bottleneck analysis driven by AI capital expenditure
The report derives the crowding-out effect on traditional industries (such as shipping) supply chains by analyzing the strong demand of data centers for equipment such as diesel generators, demonstrating the application of the supply-demand framework in cross-industry transmission analysis.
Pricing power brought by niche markets and regulatory barriers
In analyzing Halma, the report emphasizes that its niche products in highly regulated markets constitute a moat, granting it strong pricing power and stable growth, which is a typical competitive advantage analysis.
AI Maturity Index and Talent Factor
The report cites the Evident AI Index, quantifying "talent" as a key factor of AI maturity (accounting for 45%), used to explain the gap in AI development between Europe and the US and differentiation in corporate results, which is a new quantitative analysis method for qualitative factors.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- TSMC (2330.TW)Benefits from AI-driven capacity expansion demand
- Strengths
- Leading process technology, accelerating capacity construction
- Comparison
- Stronger growth certainty compared to other foundries
- Risks
- Geopolitical risk, demand volatility
- ASML (ASML.US)Benefits from improved memory capital expenditure prospects
- Strengths
- Monopoly position in lithography machines, high technical barrier
- Comparison
- Valuation multiple upgrade reflects stronger growth expectations
- Risks
- Export controls, downstream capital expenditure cuts
- Schneider Electric (SCHN.PA)Benefits from electrification and data center construction
- Strengths
- Strengthened AI software capabilities through acquisition of Cognite, full industry chain layout
- Comparison
- One of the purest beneficiaries among European industrial stocks
- Risks
- Macroeconomic slowdown, integration risk
- Halma (HLN.L)High-quality growth compounder, newly added to Conviction List
- Strengths
- Niche market pricing power, M&A-driven growth
- Weaknesses
- Photonics business guidance was previously disappointing
- Comparison
- Higher earnings quality and stability compared to general industrial stocks
- Risks
- M&A integration underperformance, valuation pullback
Key data
- TSMC Target Price3000 TWDUpgraded, reflecting accelerated capacity building
- ASML Target Price ChangeIncreased 13%Applying 43x 2027 P/E ratio
- Schneider Electric Acquisition of Cognite Consideration3.1 Billion USDAll-cash transaction, 2025 EV/Sales multiple of 18.2x
- Talent Share in Evident AI Index45%Regarded as the largest enabler of AI maturity
- Zalando Q2 Revenue Growth Expectation23%Year-over-year growth rate
Impact & implications
The report believes investors should layout around the certainty opportunities of AI capital expenditure, especially those companies with technical barriers and capacity advantages (such as TSMC, ASML, Schneider Electric). At the same time, need to be vigilant against the long-term erosion of European traditional advantage industries by Chinese competition, and avoid exposure to companies with larger risk exposure in relevant areas. In AI investment, besides hardware, attention should also be paid to enterprises with talent advantages and clear AI strategies, as this will determine the extent of long-term productivity improvement.
Risks
- Oil price falls significantly below $60/barrel, affecting capital expenditure of energy service companies like TGS
- Market share of China in Europe continues to expand rapidly, impacting profits of local European enterprises
- Shortage of AI talent constrains the landing effect of AI for European enterprises
- Supply chain bottlenecks (such as diesel engines) lead to delivery delays and cost increases
- EU trade policy adjustments fall short of expectations, unable to effectively curb Chinese competition
What to watch
- Call meeting feedback from TGS on oil prices and capital expenditure
- Integration progress of Cognite by Schneider Electric and synergy effects
- Specific strategies of European enterprises responding to Chinese competition and progress of trade barriers
- Trends of AI talent flow and actual data of enterprise investment in talent
- Capacity utilization and order situation of TSMC and ASML in subsequent quarters