Goldman Sachs The 720: Rio Tinto upgraded to Buy; AI computing power and the Asian technology chain remain core themes

Overview

This is a multi-theme Goldman Sachs The 720 research compilation covering the Rio Tinto upgrade, the US FOMC, Meta and Microsoft earnings, Korean memory, Guming, Chinese power grid equipment, Standard Chartered, Taiwan CCL, Yageo, Keyence, Hitachi, Krafton, EDU, BDO Unibank, and others. The report focuses on the impact of AI/data center capital expenditure on upstream hardware, memory, cloud computing, power equipment, and selected internet platforms, while also incorporating macro interest rates, energy prices, and emerging-market strategy.

Core views

The core views include: first, Rio Tinto's simplification strategy, cost reductions, and growth in copper-equivalent production improve free cash flow and dividend appeal; second, Microsoft Azure and Copilot growth continues to validate cloud and AI demand, although future growth momentum is constrained by the supply of additional computing capacity; third, Meta's earnings provide validation for AI computing investment, but near-term AI returns lack meaningful upside surprises and capital expenditure pressure remains a focus; fourth, Korean memory, high-end Taiwan CCL, Yageo, Keyence, Hitachi, and Chinese power grid equipment all benefit from AI servers, semiconductor capital expenditure, or grid upgrades; fifth, at the macro level, the FOMC did not raise rates and provided no clear guidance, while Goldman Sachs still expects the Federal Reserve to remain unchanged for the rest of 2026.

Analysis framework

The report uses a multi-company rapid-update framework, linking rating changes, earnings previews or beats, target-price adjustments, earnings-estimate revisions, and industry themes. At the company level, it focuses on comparing actual results with Goldman Sachs forecasts and market consensus, updating 12-month target prices and earnings estimates; at the industry level, it assesses demand strength around AI servers, HBM, DRAM, power equipment, cloud computing, and the capital expenditure cycle; at the macro level, it combines FOMC communications, market pricing of rate hikes, energy-price risks, and emerging-market inflation paths to form strategic views.

Methodology notes

• Equity researchRating and 12-month target-price framework

  Relative return potential

  Goldman Sachs assigns stocks to Buy, Neutral, or Sell categories primarily based on total return potential relative to its coverage universe; target prices generally correspond to a 12-month investment horizon.

• Fundamental analysisEarnings estimate revisions

  Earnings beats and valuation rerating

  The report repeatedly adjusts 2026-2029 earnings forecasts and target prices based on deviations in revenue, EBITDA, EPS, operating profit, net profit, and capital expenditure guidance from expectations.

• Investment factorsGS Factor Profile

  Growth, Financial Returns, Multiple, and Integrated

  The Goldman Sachs Factor Profile compares individual stocks with the market and industry peers using growth, financial returns, valuation multiples, and integrated percentile rankings.

• Events and M&AM&A Rank

  Probability ranking of becoming an acquisition target

  Goldman Sachs uses an M&A Rank from 1 to 3 to assess the probability that a covered company will become an acquisition target; for some high- or medium-probability companies, an M&A component may be included in the target price.

Asset mapping & comparison

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

• US.RIO / RIO TINTO LTD

  Beneficiary of the rating upgrade

  Strengths

  1H26 EBITDA beat expectations, the cost-reduction target was raised, copper-equivalent production is expected to grow 10% by 2030, and free cash flow and dividend appeal are improving.

  Weaknesses

  Still exposed to cycles in iron ore, aluminum, and copper prices, as well as execution of asset divestments.

  Comparison

  Compared with the previous Neutral view, Goldman Sachs believes the risk-reward profile is more attractive as the simplification strategy accelerates.

  Risks

  Declines in commodity prices, slower-than-expected project ramp-up, and non-core asset sales progressing below expectations.

• US.META / META PLATFORMS INC

  Focus stock for AI capital expenditure and internet platforms

  Strengths

  Q2 revenue was broadly in line with expectations, management provided a clear capex range, and AI computing investment can serve as a signal of application progress.

  Weaknesses

  GAAP EPS was below market consensus, legal expenses and expense guidance increased, and AI returns have not yet meaningfully exceeded expectations.

  Comparison

  Compared with Microsoft, Meta is more affected by investor concerns about the payback period of capital expenditure.

  Risks

  An excessively prolonged period of high capital expenditure, AI monetization below expectations, and continued increases in expenses and legal costs.

• US.MSFT / MICROSOFT CORP

  Core beneficiary of cloud computing and AI software

  Strengths

  4Q26 revenue and EPS beat expectations, Azure grew 43% at constant exchange rates, and paid Copilot seats exceeded 30 million.

  Weaknesses

  Future Azure growth depends on the ramp-up of additional computing capacity and resource allocation amid supply constraints.

  Comparison

  Among hyperscale cloud providers, Microsoft's Azure and Copilot growth offers more direct validation of AI revenue.

  Risks

  Constraints on computing capacity, rising capex plans, and Azure growth momentum below market expectations.

• Samsung Electronics / Korean memory chain

  Beneficiary of the AI server and HBM chain

  Strengths

  DRAM prices are expected to rise strongly for consecutive quarters, next year's HBM price outlook is substantially above consensus, and long-term agreements cover more than half of server DRAM.

  Weaknesses

  Highly dependent on the continuation of tight supply and demand and progress in HBM technology.

  Comparison

  The short-term threat from Chinese suppliers is limited because they still lag in technology and yield.

  Risks

  Supply expansion faster than expected, stronger customer bargaining power, and a slowdown in AI server demand.

• Taiwan CCL / EMC / TUC

  Beneficiary of the AI server materials chain

  Strengths

  Demand for high-end CCL is strong, prices have risen 10-60%, and new capacity through 2028 has already been fully booked by AI, LEO, and switch customers.

  Weaknesses

  Valuations and earnings are sensitive to assumptions about high-end demand, pricing, and gross margins.

  Comparison

  High-end CCL manufacturers benefit more directly from AI server upgrades than conventional material suppliers.

  Risks

  Delays in AI server projects, price increases below expectations, expansion execution risks, and customer concentration.

Key data

• Rio Tinto rating actionUpgraded from Neutral to Buy, with a 12-month target price of A$181.91H26 underlying EBITDA was US$14.8bn, above Goldman Sachs' forecast, driven by a lower tax rate, higher copper revenue, and lower iron ore and aluminum costs.
• Rio Tinto costs and asset portfolioYear-end cost-out target raised to US$1.8bn; up to US$10bn of non-core asset sales to be pursuedManagement is accelerating its simplification strategy, while Goldman Sachs raised its 2027 and 2028 EBITDA forecasts by 2% and 1%, respectively.
• Meta Q2 resultsRevenue of $60.80bn; Q3 revenue guidance of $61.0-64.0bn; GAAP EPS of $6.18EPS was below the Street consensus of $7.20; the FY26 capex range narrowed to $130-145bn, while the low end of total expense guidance was raised to $165-169bn.
• Microsoft 4Q26 resultsTotal revenue 3% above expectations; adjusted EPS of $4.74, 11% above market expectationsAzure grew 43% at constant exchange rates, and paid Copilot seats exceeded 30 million.
• Korean memory price outlookTraditional DRAM prices are expected to achieve strong double-digit quarter-on-quarter growth in 3Q26 and 4Q26Samsung Electronics' HBM prices are expected to rise 87% year over year next year, above the consensus expectation of 52%.
• US FOMCNo rate hike at the July meeting; statement materially unchanged and no policy guidanceThe bond market priced a 60% probability of a rate hike in September, but Goldman Sachs still expects the Federal Reserve to remain on hold for the rest of 2026.
• Chinese power transformer exportsTotal exports rose 47% year over year in June; exports to the US rose 172% year over yearThe report expects the US power transformer supply-demand gap to persist through 2028. Chinese suppliers have delivery times of 24-36 weeks, significantly shorter than the global average of 128 weeks.
• BDO Unibank rating actionDowngraded from Buy to Neutral, with the 12-month target price reduced from PHP140 to PHP136Reasons include slower loan growth in 2H26, an expected FY26 credit cost of 65bps, and a weaker expense-growth outlook.

Impact & implications

The investment implication is that AI and data center demand continue to spread across multiple layers: Microsoft and Meta represent capital expenditure by hyperscale cloud and internet platforms; Korean memory, Taiwan CCL, Yageo, and Keyence benefit from AI servers and semiconductor capital expenditure; and Hitachi and Chinese power grid equipment benefit from energy and grid upgrades. At the same time, the duration of elevated capital expenditure, energy-price shocks, and uncertainty over the interest-rate path may affect valuations and emerging-market asset performance.

Risks

• If high capital expenditure by Meta and other hyperscale cloud providers lasts longer than expected, it could pressure free cash flow and valuations.
• If demand for AI servers, HBM, CCL, and power equipment falls short of expectations, earnings forecasts for related upstream companies may be revised downward.
• If Brent crude exceeds $120/bbl in 2026Q4 due to escalating tensions in the Middle East, emerging-market inflationary pressure could rise again.
• The Federal Reserve's policy path remains uncertain. The market has priced in approximately a 60% probability of a September rate hike; if inflation slows less than Goldman Sachs expects, interest-rate risks could increase.
• Financial stocks such as BDO Unibank face risks from slower loan growth, rising credit costs, and weak expense growth.
• Although some companies maintain Buy ratings, their earnings forecasts or target prices have been lowered, indicating that fundamental improvement is not occurring uniformly.

What to watch

• Execution of Rio Tinto's US$1.8bn year-end cost-reduction target and progress in divesting up to US$10bn of non-core assets.
• The ramp-up of Microsoft's additional Azure capacity, Copilot seat growth, and future capex plans.
• Actual revenue returns from Meta's AI investment, expense control, and restructuring offsets.
• The extent to which Korean DRAM and HBM prices meet expectations in 3Q26, 4Q26, and next year.
• Price increases and gross-margin expansion for Taiwan high-end CCL, and delivery of capacity already booked through 2028.
• The US power transformer supply-demand gap and changes in Chinese suppliers' export share.
• Upcoming core inflation data, September FOMC expectations, and the transmission of energy shocks to emerging markets.
• Ramelius Resources' September quarterly multi-year outlook and resource update.