Goldman Sachs Updates Conviction List: Focus on AI Token Surge and Supply Chain Opportunities

Overview

This report summarizes Goldman Sachs’ weekly research highlights, focusing on updates to the 'Conviction Buy Lists' for Europe, the U.S., and APAC, along with deep dives into two macro themes: (1) the token consumption surge triggered by Agentic AI and its implications for industry-wide profit margins; and (2) the potential pressure on European corporate margins from Middle East-driven supply chain disruptions—particularly in aviation fuel and chemicals. Despite cost pressures from supply chains, the report notes strong resilience in European equities and upgrades 2026 earnings forecasts accordingly.

Core views

Agentic AI and Token Boom: Analyst James Schneider argues that the proliferation of Agentic AI will drive token consumption to increase more than 24-fold by 2030. This trend is not just a demand story but also one of margin expansion. As token costs decline, more enterprise use cases become economically viable (e.g., coding agents via API are far cheaper than human labor). This benefits the entire AI value chain, especially companies providing compute, power, and infrastructure. In Europe, Ceres Power (fuel cells addressing data center power constraints) and Schneider Electric (electrification) are seen as key beneficiaries. Supply Chain Disruptions and Margin Pressure: Strategist Guillaume Jaisson warns that Middle East-related supply chain disruptions are exerting margin pressure on European corporates. The chemicals and consumer-facing sectors—including both discretionary and essential consumer goods—are most vulnerable due to limited ability to pass through high input costs amid weakening demand. Aviation fuel supply will remain extremely tight even under base-case scenarios, and chemical shortages are another major concern. The auto sector faces dual headwinds from raw material and DRAM cost inflation, expected to create at least 170 basis points of EBIT margin drag in H2 2026–2027. Conviction List Updates: In Europe, Goldman Sachs adds Naturgy (strategic pivot toward growth and benefiting from high LNG prices), Norsk Hydro (positioned to fill aluminum value-added product gaps caused by Middle East disruptions), and flatexDEGIRO (benefiting from rising retail investor participation in Europe). Informa and Bureau Veritas have been removed. Other maintained or recently upgraded names include Enel, HSBC, Anheuser-Busch InBev, Zalando, Knorr Bremse, Argenx, Vonovia, and IHG—companies showing strong recent earnings or improved outlooks. Macro and Strategy Views: Goldman Sachs raises its 2026 earnings growth target for the STOXX Europe 600 index from 5% to 10%, primarily driven by higher commodity prices. Despite geopolitical concerns, European equities have shown notable resilience. While utilities may see short-term pullbacks on peace-related news, they remain structurally favored over the long term due to energy security, electrification trends, and falling bond yields.

Analysis framework

Goldman Sachs employs a combined bottom-up and top-down analytical approach. At the stock level, the firm uses its 'Conviction Buy List' framework to identify names where analysts hold differentiated views and high total return potential, dynamically adjusting based on recent earnings results. At the sector level, it applies supply-demand frameworks to model AI token consumption growth curves and assess how supply bottlenecks (e.g., in aviation fuel and chemicals) transmit cost pressures through the value chain. At the macro level, it tracks geopolitical developments (especially in the Middle East) to evaluate their marginal impact on commodity flows and, consequently, European corporate profitability.

Methodology notes

• Industry/Sector Analysis FrameworkSupply-demand framework

  Supply-demand analysis of AI token consumption and cost-benefit comparisons

  The report compares the token cost of AI agents performing tasks against human labor costs to determine which applications will achieve commercial viability first, thereby identifying inflection points in AI value chain demand and profit distribution.

• Industry/Sector Analysis FrameworkUpstream-Midstream-Downstream Transmission

  Transmission mechanism of supply chain bottlenecks on downstream margins

  The report examines how upstream shortages (e.g., aviation fuel, chemicals, DRAM) drive up input costs and analyzes the ability of downstream industries (e.g., airlines, chemicals, autos) to pass these costs onto customers amid weak demand, thus assessing the degree of margin compression.

• Valuation MethodSum-of-the-Parts (SOTP) Valuation

  Application of SOTP valuation to complex multi-segment companies

  When discussing companies like Weichai Power, the report implies the use of Sum-of-the-Parts (SOTP) valuation to reassess re-rating potential, particularly suitable for diversified businesses with distinct valuation logics across segments.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Naturgy

  Newly added to European Conviction Buy List

  Strengths

  Strategic shift toward growth; near-term beneficiary of high LNG prices

  Risks

  Energy price volatility

• Norsk Hydro

  Newly added to European Conviction Buy List

  Strengths

  Positioned to fill supply gaps in aluminum value-added products (VAP) caused by Middle East disruptions

  Risks

  Geopolitical de-escalation eliminating pricing premiums

• flatexDEGIRO

  Newly added to European Conviction Buy List

  Strengths

  Scale advantages, competitive pricing, and broad product offering; benefits from rising European retail investor engagement

  Risks

  Declining market trading volumes

• Ceres Power

  Beneficiary of AI power bottleneck solutions

  Strengths

  Fuel cell technology addresses data center power constraints; U.S. licensing agreements offer upside potential

  Risks

  Slower-than-expected technology adoption

• Enel

  Beneficiary of structural tailwinds in utilities

  Strengths

  Current valuation discount appears unsustainable; benefits from electrification trends and falling bond yields

  Weaknesses

  Quarterly results slightly below expectations (excluding one-offs)

  Risks

  Regulatory policy changes

Key data

• AI Token Consumption Growth Forecast>24x (2030 vs. current)Monthly AI token processing volume from the agentic AI economy is projected to grow over 24-fold by 2030
• STOXX Europe 600 Earnings Expectation10%2026 earnings growth target raised from 5% to 10%
• Auto Sector Margin Headwind170 bpsRaw material and DRAM cost inflation expected to create at least 170 basis points of EBIT margin pressure in H2 2026–2027
• AI Hyperscaler Capex$755 billionConsensus expects capex by top AI hyperscalers to reach $755 billion in 2026, up 83% year-over-year
• U.S. Data Center Capacity GrowthMore than doubleU.S. data center capacity is projected to more than double between end-2025 and end-2027

Impact & implications

For investors, the report suggests focusing on structural opportunities in AI infrastructure—particularly power supply and hardware—while remaining cautious about margin erosion in traditional European manufacturing and consumer sectors due to supply chain disruptions. Avoid companies unable to pass through rising costs. The Conviction List adjustments reflect the importance of identifying stocks with idiosyncratic growth narratives and defensive characteristics amid high volatility. Utilities and telecoms are favored for their defensive qualities, deleveraging trends, and structural improvements in returns.

Risks

• Escalation of Middle East geopolitical conflict worsening supply chain disruptions
• Persistently high aviation fuel and chemical prices compressing downstream margins
• Slower-than-expected growth in AI capex reducing hardware demand
• Deteriorating European consumer confidence impacting discretionary spending
• Interest rate policy shifts increasing financing costs for highly leveraged sectors like utilities

What to watch

• Evolution of Middle East situation and its specific impact on oil, chemical, and aviation fuel supplies
• Pace of token cost reduction in agentic AI and enterprise adoption rates
• European automakers’ responses to raw material and chip cost inflation and resulting margin trends
• Actual realization of U.S. data center power demand and grid capacity constraints
• Execution progress of newly added Conviction List companies (e.g., Naturgy, Norsk Hydro) on strategic initiatives