The note speaks most directly to Asia’s AI hardware markets, such as Taiwan and South Korea (both are shut for a holiday today, along with mainland China).
Those markets rely heavily on cloud spending plans holding up while bond yields keep rising. A forecast of spending climbing to $1.2 trillion by 2027 gives investors a reason to buy dips rather than cut exposure on rate-driven sell-offs. The most useful point in the note may be the timing: volatility into early November, then a possible year-end rally. It lines up with the midterms, Tuesday’s White House AI meeting and a week without Chinese market participation.
Along with Morgan Stanley’s barbell call and UBS’s constructive stance, it adds to a broad consensus among major banks that the AI cycle is not over.
—
Bond yields are rising, but Goldman is sticking with AI. It argues that $800 billion of cloud spending and Asian valuations near historic lows outweigh the rate pressure, and it sees midterm volatility giving way to a year-end rally.
Summary:
- Goldman’s Timothy Moe says AI-related stocks remain attractive despite rising government bond yields
- Hyperscale cloud companies are expected to invest around $800 billion this year and about $1.2 trillion by 2027
- That spending is a key demand signal for Asia’s AI hardware supply chain
- Asian equities trade at roughly 10 times earnings, near the low end of their historical range
- Earnings growth should help buffer the high-rate environment
- Moe expects volatility into the US midterms, followed by a possible year-end rally
Goldman Sachs still sees value in AI-related stocks despite the surge in government bond yields, Jinshi Data reported. Timothy Moe, the bank’s head of Asia-Pacific equity strategy, pointed to massive cloud spending as a powerful support for the region’s hardware supply chain. Moe said the largest cloud computing companies are expected to invest around $800 billion this year, potentially rising to about $1.2 trillion by 2027, a demand signal he sees as critical for Asian makers of AI hardware.
The comments come as the global bond sell-off tests investor appetite for growth stocks. Long-dated Treasury yields have climbed to their highest levels in around two decades this week, raising the discount rate on future earnings and putting pressure on richly valued sectors. Moe argued that corporate earnings growth should provide a buffer against that high-rate environment.
Valuation is another pillar of his case. Asian equities trade at roughly 10 times earnings overall, near the bottom of their historical range, which Moe described as extremely low. That gives the region more room to absorb rate pressure than markets where valuations are already stretched, and adds further support for AI-linked stocks.
He does not expect a smooth ride in the near term. Moe anticipates that markets will remain somewhat volatile in the run-up to the US midterm elections in early November, with high energy prices and geopolitical risks adding pressure. Once that period passes, however, he sees scope for a rally before year-end, driven by earnings growth and a recovery in valuations.
The view fits a broader shift in how major banks are framing the AI trade. Rather than calling time on the theme, strategists are increasingly arguing that the investment cycle has further to run, even as they debate where the best opportunities now lie. For Asia, home to much of the AI hardware supply chain, the scale of planned cloud spending remains the single most important number.
The risk to that thesis is that bond yields keep climbing and eventually force the biggest spenders to rethink the pace of their investment. For now, Goldman is betting that the commitment to AI infrastructure, combined with cheap valuations across the region, will outweigh the pressure from higher rates.
This article was written by Eamonn Sheridan at investinglive.com.