Market Outlook – Goldman Sachs Highlights New Investment Themes Beyond AI Volatility

Market Outlook –  Investors may find fresh opportunities outside the artificial intelligence sector as market volatility continues to affect AI-related infrastructure stocks, prompting a broader search for stable growth areas, according to a new report from Goldman Sachs.

The investment bank said that while artificial intelligence has remained a dominant market theme, sharp price fluctuations in AI infrastructure companies are encouraging investors to diversify their portfolios. Goldman Sachs identified three investment themes that could provide attractive long-term growth while maintaining limited exposure to the market movements that have largely been driven by AI-focused stocks.

AI Infrastructure Faces Short-Term Pressure

Goldman Sachs believes AI infrastructure investments could continue to experience challenges in the near future due to elevated market volatility, crowded investor positioning, and the absence of immediate catalysts capable of supporting another strong rally.

The report noted that the momentum investment factor has recently experienced unusually high levels of volatility. Over the past three months, annualised volatility reached 36 percent, marking the highest reading recorded outside recessionary periods during the last 45 years. Despite this turbulence in individual AI-related shares, overall volatility across the broader S&P 500 index has remained relatively contained because stock price movements have become less correlated with one another.

Consumer Experience Companies Gain Attention

One of the key themes highlighted by Goldman Sachs focuses on businesses built around in-person consumer experiences. This group consists of 36 companies operating in industries such as entertainment, cinemas, casinos, gaming, hotels, resorts, cruise operators, and leisure destinations.

According to the report, consumer spending on experiences has remained resilient. During the first quarter of 2026, spending in these categories expanded by 6 percent compared with the same period a year earlier, significantly exceeding the 2 percent growth recorded across the wider services sector.

These companies have also delivered stronger market performance, outperforming the equal-weight Consumer Discretionary sector by 17 percentage points since the beginning of the year. Goldman Sachs added that valuations for these businesses continue to remain below their long-term average, while their reliance on physical services may reduce the potential impact of future AI-driven disruption.

Focus on High-Quality Compounders

The second investment theme centres on a carefully selected group of 15 companies described as “compounders.” These firms have consistently demonstrated strong earnings expansion, high returns on invested capital, healthy cash flow generation, and solid balance sheets.

The report highlighted that the median company within this group has delivered earnings-per-share growth at more than twice the pace of the median S&P 500 company over the past three years. Analysts expect this performance advantage to continue in the coming years.

Even with their strong financial fundamentals, these stocks have lagged the equal-weight S&P 500 by around 7 percentage points so far this year. Goldman Sachs noted that the group’s valuation premium has fallen to historically low levels, potentially creating opportunities for long-term investors.

Merger Activity Creates Additional Opportunities

Goldman Sachs also pointed to the increasing pace of merger and acquisition activity in the United States as another area worth monitoring. The report said announced M&A transactions have reached approximately USD 1.2 trillion so far this year, representing a 32 percent increase compared with the same period last year. The total number of completed deals has also risen by 12 percent.

Its basket of 71 companies viewed as potential acquisition candidates has outperformed the equal-weight S&P 1500 index by 8 percentage points since the end of the first quarter. However, Goldman Sachs observed that, with the exception of biotechnology firms, current market valuations still do not fully reflect a meaningful takeover premium.

Overall, the report suggests that as AI-related investments become increasingly volatile, investors may benefit from considering a broader range of sectors that offer steady earnings potential, resilient business models, and opportunities linked to corporate deal-making.