Global stocks extend gains as earnings spread from AI to broader sectors
AI summary card
Global stocks extend gains as earnings spread from AI to broader sectors
Goldman Sachs believes global equity markets will continue to rise. Although AI trading experiences volatility, earnings growth is expanding from technology to financials, industrials, energy, and other sectors, leading to a recovery in overall risk appetite.
- MSCI AC World rose 2.9% last week; US, Japan, and Europe all gained.
- Tech sector up 5.5%, but South Korea's KOSPI fell 7.4% for the week.
- Energy sector down 3.1%, with Brent crude falling over 8%.
- EM earnings upgrades continue, with Korean and Taiwanese tech as main drivers.
- Goldman Sachs Risk Appetite Indicator rose above 1.0, indicating stronger risk appetite.
- South Korea: Strategic bullish stance unchanged; valuations have fallen significantly and positions have been substantially cleared.
Report interpretation
Overview
In this week's global market weekly, Goldman Sachs noted that global stock markets continued their upward trend, with the MSCI AC World index rising 2.9% last week across the US, Japan, and Europe. The most core阶段性 change is: AI trading remains volatile, but earnings growth is spreading outward from technology. Earnings beats from financials, industrials, and energy sectors have made substantive contributions, while overall risk appetite indicators have risen into the optimistic range. The report focuses on momentum de-leveraging in the tech/AI sector, the sustainability of EM earnings upgrades, valuation and position changes in Korean tech stocks, and provides a subsequent macroeconomic data calendar as a tracking background.
Core views
Market performance: Last week, the MSCI AC World rose 2.9%, led by the US (+3.7%), followed by Japan (+2.6%) and Europe (+2.1%). Structure was highly divergent: the tech sector rose 5.5%, but South Korea's KOSPI fell 7.4% for the week, and the energy sector dropped 3.1%, with Brent crude falling over 8% for the single week. Overall risk appetite strengthened further; Goldman Sachs' Risk Appetite Indicator (RAI), already at a positive level, rose further above 1.0, indicating that market risk sentiment moved from cautiously optimistic to more actively bullish. The earnings theme is the most significant change Goldman Sachs highlights this week: Tech and AI-related stocks are undergoing a round of momentum-driven de-leveraging. Just two weeks ago, global tech stocks saw the largest short covering since January 21, and the second-largest two-day short covering in the past decade. Goldman Sachs views this as a deleveraging event following high positioning accumulated earlier in the tech sector, rather than a fundamental inflection point. Meanwhile, earnings momentum in emerging markets remains supported and is expanding. Earnings expectations for EM regions have been continuously upgraded during this earnings season, with expectations for 2026 and 2027 both trending upward. A significant portion of the upside surprises came from Korean and Taiwanese tech companies, but strong earnings from financials, industrials, and energy also contributed meaningfully, corroborating the overall judgment that earnings growth is spreading beyond technology. Korean tech stocks are a case singled out by Goldman Sachs: its strategic bullish view remains unchanged. Despite continued AI capital expenditure, tight memory supply, and optimistic earnings expectations, Korean tech stock valuations have fallen significantly. On the position side, there has been a clear clearance—leverage ETF sizes have decreased, margin exposure has reduced, regulations have tightened, and hedge fund exposure has moderated. Goldman Sachs believes this means the chip structure of Korean tech stocks has become cleaner.
Analysis framework
Goldman Sachs' analysis unfolds along two main threads: bottom-up tracking of earnings revision data and top-down observation of positions and market sentiment. It interprets the structural divergence of this week's market (tech up, Korea down, energy and oil down) within the framework of earnings revisions: By comparing the direction and magnitude of earnings expectation upgrades/downgrades for different regions and sectors in 2026/2027, it judges whether the rally is driven solely by a single theme (AI) or has diffused to broader fundamental drivers. The repeated emphasis in the text on the contribution of non-tech sectors like Financials, Industrials, and Energy to EM earnings upgrades serves to prove the conclusion that earnings growth is broadening. Regarding the volatility in AI trading, Goldman Sachs does not view it as a deterioration in fundamentals, but explains it from a funding and position perspective as "momentum-dominated de-leveraging," citing record short covering in tech stocks two weeks ago as evidence. For the Korean market, Goldman Sachs combines earnings direction (still positive) and chip structure (already cleared) to form a deduction chain of "valuation drop + position cleanup = strategic bullish unchanged." Additionally, the entire report uses emotional and risk frameworks such as RAI and GS Bull/Bear indicators to verify the cycle position where the market resides.
Methodology notes
Earnings Revision Breadth Analysis: By statistically analyzing the direction and magnitude of earnings expectation upgrades/downgrades across different regions and sectors, determine if the rise is driven by a single theme or fundamental diffusion.
Used in the report to measure 'whether the rally is sustainable': If only tech is rising and only AI is beating expectations, the rally is fragile; when financials, industrials, and energy also upgrade synchronously, the earnings support becomes more solid.
Position and De-leveraging Observation: Tracking data such as short covering size, leverage ETF scale, margin exposure, and hedge fund positions to judge the crowding and clearance degree of certain assets.
Goldman Sachs used 'the largest two-day short covering in global tech stocks in ten years two weeks ago' to explain that this round of AI volatility is momentum deleveraging rather than fundamental deterioration; used the decline in Korean leverage ETFs, margins, and hedge fund exposure to show that its chip structure has become cleaner.
Relative Valuation Percentile and Historical Interval Comparison: Using 12-month/24-month forward P/E ratios relative to their position over the past 20 years to judge whether a region or sector's valuation has returned to an attractive interval.
The report's judgment on Korean tech stocks is built on 'valuations have fallen significantly'—although fundamentals and earnings expectations remain positive, the stock price drop has made valuations attractive again.
Risk Appetite and Sentiment Indicators: Using emotional frameworks such as RAI (Risk Appetite Indicator) and GS Bull/Bear market indicators to assist in judging the risk cycle position where the market resides.
The Goldman Sachs report cited RAI rising above 1.0 to quantify the judgment of 'overall risk appetite strengthening,' providing emotional-level corroboration for the bullish tone.
Earnings Cycle Positioning: Judging whether fundamental prosperity is at an upward inflection point or on an upward trend through the continuous direction of earnings expectation upgrades/downgrades.
The report emphasized that EM 2026 and 2027 earnings expectations were continuously upgraded during the earnings season, and the scope expanded from tech to financials, industrials, and energy, implying that earnings prosperity is still spreading rather than peaking.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Korean Tech Sector (KOSPI related, e.g., Samsung, SK Hynix, and other AI/memory chain stocks)Goldman Sachs maintains a positive strategic view on the Korean market, believing that AI capex continues, memory supply is tight, and earnings expectations are optimistic, but stock prices have fallen significantly and chips have been cleared.
- Strengths
- Continued AI capex, tight memory supply, positive earnings expectations
- Weaknesses
- Valuations once fell significantly due to market volatility, recent weekly decline of 7.4%
- Comparison
- Together with Taiwanese tech stocks, they constitute the main drivers of EM earnings surprises; however, Korean short-term stock price performance is significantly weaker than the global tech sector as a whole.
- Risks
- Increased stock price volatility during the momentum de-leveraging phase; changes in leverage funds and hedge fund exposure may amplify volatility.
- Taiwanese Tech Stocks (TWSE)One of the important engines of EM earnings upgrades, with AI-related tech companies as the main contributors.
- Strengths
- Strong momentum in earnings expectation upgrades, outstanding performance over the past year and this year.
- Weaknesses
- Not elaborated in the report.
- Comparison
- Listed together with Korean tech as the two major drivers of this round of EM earnings surprises.
- Risks
- Not elaborated in the report.
Key data
- MSCI AC World Weekly Gain+2.9%Global stocks generally continued their upward trend
- US Market Weekly Gain+3.7%Leading among major regions
- Japan Market Weekly Gain+2.6%Following closely behind the US
- Europe Market Weekly Gain+2.1%Moderate gain
- Tech Sector Weekly Gain+5.5%Despite AI volatility, tech still leads
- South Korea KOSPI Weekly Change-7.4%Diverged from global tech trends, significant weekly decline
- Energy Sector Weekly Change-3.1%Significant drag from oil prices
- Brent Crude Weekly DeclineOver 8%Main reason for pressure on energy sector
- Goldman Sachs Risk Appetite Indicator (RAI)Rose above 1.0Overall risk appetite further strengthened
- Global Tech Stock Short CoveringLargest since Jan 21Recorded the second-largest two-day short covering in ten years two weeks ago
- EM Earnings Upgrades2026/2027 expectations rising simultaneouslyDriven mainly by Korean, Taiwanese tech and financial, industrial, energy sectors
Impact & implications
Goldman Sachs believes that the support for current global stock market gains is expanding from a single AI theme to broader earnings improvements, which is a healthier signal for the sustainability of the rally. Volatility in the tech sector is interpreted as de-leveraging behavior at the position level, rather than fundamental deterioration, so it will not change the overall bullish judgment; conversely, position clearing itself provides a cleaner foundation for subsequent market movements. The Korean case best embodies this logic: Fundamentals remain favorable (continued AI capex, tight memory supply, optimistic earnings expectations), but stock prices have fallen significantly, coupled with shrinking leverage funds and hedge fund exposure. Goldman Sachs maintains a bullish attitude, believing that both its valuation and chip structure have returned to more advantageous positions. For macro trackers, upcoming US CPI data and speeches by Fed officials (Hammack, Barkin), UK and Eurozone GDP, BoJ policy statement summary, etc., will provide a verification window to judge whether risk appetite can continue.
Risks
- Tech/AI-related assets are in a momentum-dominated de-leveraging phase and may continue to experience periodic severe volatility.
- Linked declines in the energy sector and crude oil prices may drag down overall market performance.
- Risk that profit upgrades are concentrated in a few tech main lines: If earnings diffusion fails to continue, market support may narrow again.
What to watch
- US CPI data and speeches by Federal Reserve officials (Hammack, Barkin).
- UK GDP, Eurozone GDP and industrial output, European data such as inflation in Italy, Germany, Norway, and Sweden.
- BoJ July meeting policy statement summary and July domestic corporate price index.
- China July credit and inflation data, Singapore and Malaysia Q2 GDP, India inflation.
- Whether EM earnings upgrades will continue to spread from tech to financials, industrials, energy, and other sectors.