Goldman Sachs (GS) is warning investors about an “obvious downside threat” that’s lurking in the stock market.
Claim 55% Off TipRanks
Trade NVDA with leverageThe Wall Street investment bank says that a re-escalation of hostilities in the Middle East or a prolonged closure of the Strait of Hormuz remain “the most obvious downside threat” to financial markets, even as a continued rally in artificial intelligence-related (AI) stocks pushes valuations to new highs.
In a note to clients, Goldman Sachs said that the Iran ceasefire has allowed markets to compress risk across asset classes, with renewed optimism lifting AI stocks and sending indices up to record highs. But investors shouldn’t become complacent, warns the bank.
Oil Prices Remain Key
The bank believes a gradual restart of energy flows through the Strait of Hormuz would provide meaningful relief across oil prices and stock markets, leading the current market rally that is concentrated in AI names to broaden out to other stocks and sectors.
Goldman Sachs also notes that technology investment spending in AI has now exceeded the late-1990s peak of the dotcom era as a share of U.S. gross domestic product (GDP), and warned of growing risks among richly valued technology stocks such as Alphabet (GOOGL) and Nvidia (NVDA).
Is GOOGL Stock a Buy?
The stock of Alphabet has a consensus Strong Buy rating among 33 Wall Street analysts. That rating is based on 28 Buy and five Hold recommendations issued in the last three months. The average GOOGL price target of $426.44 implies 11% upside from current levels.
