Risk appetite falls below zerois the window to add to equities finally open? Amid the semiconductor rebound, Goldman Sachs sticks with an "overweight" on equities.

Title context: Risk appetite falls below zerois the window to add to equities finally open? Amid the semiconductor rebound, Goldman Sachs sticks with an "overweight" on equities. Text: Although the global equity market's semiconductor sector has already begun a major counteroffensive, the credit market is still raising financing thresholds for some AI-related technology companies. On October 23 and 26, the Philadelphia Semiconductor Index rose 0.44% and 2.82%, respectively, rebounding about 3.27% over the two days combined; the Nasdaq 100 fell about 6.24% over the two weeks through the 23rdmeaning that after posting its worst two-week decline since April 2025, the Nasdaq finally rebounded significantly by 1.09% on the 26th. However, based on the closing high on October 6, the Philadelphia Semiconductor Index and the Nasdaq 100 are still about 16.15% and 6.25% lower, respectively. The rebound is repairing pessimistic pricing, but there is still obvious room before losses are recovered. The divergence in the global corporate credit bond market is even more striking. Just as Wall Street financial giants such as Morgan Stanley and Goldman Sachs Group, Inc. continue to be bullish on the equity market, recent market action has precisely displayed this tension of a semiconductor-led technology stock rebound alongside the funding fragmentation and divergence shown in the corporate credit bond market. From September 25 to October 26, the spread on CoreWeave's five-year credit default swaps (CDS) soared from 835 to 1,148 basis points, Meta's rose from 98 to 121 basis points, and Microsoft Corporation's rose only from 52 to 55 basis points. Under a 40% recovery rate assumption, CoreWeave corresponds to an approximately 62% five-year cumulative implied default probabilitythis metric includes a risk premium and cannot be regarded as an actual default forecast. During intraday trading on October 26, the five-year credit default swap (CDS) spread of CoreWeave (CRWV.US), the stock at the very center of the "AI computing power selloff storm" and the "AI bubble burst narrative," was about 1,148 basis points; under a 40% recovery rate assumption, the model estimates an approximately 62% five-year cumulative implied default probabilitythis metric also mainly includes a credit risk premium and cannot be directly equated with the company's actual probability of default over the next five years. On the cash bond side, data compiled by media on October 22 showed that the yield on CoreWeave bonds maturing in 2031 reached 15.76%; SoftBank's five-year CDS rose to 432 basis points on October 20, and the coupon on its dollar bonds issued in September was as high as 9.75%. These quotes across different dates and different instruments together show that while the equity market can trade an earnings recovery in advance, these institutional creditors in the credit bond market are still constantly asking whether the funds needed for the AI computing infrastructure expansion frenzy can continue to be delivered against the backdrop of surging AI financing costs driven by GEO Group Inc energy inflation risks and high U.S. Treasury yields. It is understood that the latest "GOAL Kickstart" research report from Wall Street financial giant Goldman Sachs Group, Inc., which focuses on financial market risk appetite and equity-bond allocation stance, shows that the technology-led risk repricing has significantly reduced market crowding, but credit pressure has not yet been lifted; earnings support, lower valuations, and reduced positioning are still enough to support the Goldman Sachs Group, Inc. financial market strategist team's "moderately pro-risk" asset allocation stance, which leans toward optimistic forecasts for equities and government bonds. The report places the risk appetite indicator exclusively compiled by Goldman Sachs Group, Inc., which has fallen to -0.5, the decline in credit excess returns, the rebound in major government bonds, pressure on European assets, and the leadership of quality and defensive styles into the same cross-asset framework for explanation, and cross-validates them with valuations, earnings revisions, fund flows, volatility, liquidity, and recession models. Therefore, Goldman Sachs Group, Inc. maintains an "overweight" on equities for the 3-month and 12-month horizons, while being "underweight" on the credit bond market, "overweight" on cash in the short term, and "overweight" on government bonds for the 12-month horizon. These views and allocation stances of Goldman Sachs Group, Inc. significantly support "selectively adding exposure to equities on dips," but the report does not, as during the April 2025 U.S. stock market crash, declare that the market has reached a certain bottom and is ushering in a new bull market. The Goldman Sachs Group, Inc. research report shows that semiconductors are leading the counteroffensive, while the AI credit market is still repricing financing costs and the timing of cash flow realization, so global capital now presents a clear tension of "equities seeking repair, credit continuing to stratify." The Goldman Sachs Group, Inc. risk appetite indicator has fallen into negative territory and has not yet reached the historically stronger contrarian buying zone, but resilient technology earnings expectations, falling valuations, and reduced positioning crowding have already improved the expected return on equities. This is precisely the underlying basis for Goldman Sachs Group, Inc. maintaining an overweight on equities for 3 and 12 monthsthe opportunity to add positions depends on the relationship between earnings and purchase prices, while whether the market's next leg can stabilize depends on whether technology giant earnings, AI financing, and central bank policy can improve together. In addition, as Meta Muse and OpenAI's GPT-6 Astra fully ignite the wave of AI agents, the "AI FOMO trade" (referring to investors' fear of missing out on gains in AI-related assets, and therefore chasing or rebuilding previously reduced technology stock allocations) has made a comeback. From the underlying architecture of AI computing infrastructure, Muse and Astra are expected to further expand the scope of AI agent use; the massive expansion of AI inference workloads they bring will simultaneously increase demand for model inference, tool execution, and state management, while also deepening competitive pressure on some software companies. The AI capital expenditure forecasts and outlook from JPMorgan's strategist team show that hyperscale cloud providers' capital expenditure will be about US$950 billion in 2026, about US$1.4 trillion in 2027, and about US$3 trillion in 2030. For the epicenter of the global AI trade and technology stock selloffnamely the memory chip sector that has recently been hit hardmarket bullish sentiment and fundamental optimism remain strong. Recent KeyBanc Asia survey data show that AI data centers are still absorbing memory and other AI computing resource supply on a broad scale, pushing price increases through 2027. The institution forecasts that blended HBM prices may rise sharply by 80%100% in Q1 2027; on DRAM memory pricing, KeyBanc forecasts a quarter-on-quarter increase of 15%20% in Q4 2026 on top of a strong Q3 increase, followed by another 10%15% increase in Q1 2027; for NAND pricing, it forecasts a quarter-on-quarter increase of about 20% in Q4 2026 on top of a strong Q3 base, followed by another 10%15% increase in Q1 2027. Risk appetite falls below zero: optimism in the credit market recedes first, and the semiconductor sector once again drives global pricing The Goldman Sachs Group, Inc. research report shows that the Risk Appetite Indicator (RAI) exclusively compiled by Goldman Sachs Group, Inc. has fallen to about "-0.5," hitting its lowest level since April 2025; historically, only below -1, and especially when very close to -2, has a stronger contrarian signal formed. However, Goldman Sachs Group, Inc. strategists emphasize that the clearer positive trajectory now is that positioning constraints on risk asset gains have eased compared with late summer. The deterioration in the indicator this time mainly came from the credit subcomponent and dragged down the "global growth" factor; gains in major economies' government bonds improved the "monetary policy" factor and provided some buffer against the AI stock selloff. The widening spread between French and German government bonds also made European-related assets perform weaker than the level that the CKH HOLDINGS policy factor could explain; the relative strength of quality, defensive, and value styles softened the impact of the retreat in technology momentum trades on the broader market. The decline in credit excess returns here refers to weaker credit performance after excluding matched government bond returns, and does not mean that all corporate bond prices fell simultaneously. The global technology stock factor, in which the semiconductor sector accounts for the vast majority (more than 50%), has become the absolute center of global cross-asset pricingthat is, the semiconductor sector is once again driving the global capital market pricing system, especially macro fund flows and the cross-asset pricing system, which are all watching semiconductors. Goldman Sachs Group, Inc. provides very direct chart-style statistical evidence for this trend: the short-term correlation between RAI and "Nasdaq 100 performance relative to the S&P 500 equal-weight index" has recently been close to 1; the cross-sectional fit between asset returns and semiconductors over the past three weeks is about 54%, while the fit with oil prices is only about 2%. The U.S. dollar has also recently shown stronger pro-cyclical characteristics. The options market is concentrating risk pricing on the next two weeks: technology stocks are more focused on this week's earnings from Microsoft Corporation, Alphabet Inc. Class C parent Alphabet, and Amazon.com, Inc., while long-term U.S. Treasuries and high-yield credit are more focused on next week's U.S. midterm elections; this week's Federal Reserve, Bank of Japan, and European Central Bank decisions are also key. The baseline of Goldman Sachs Group, Inc. economists remains that the Federal Reserve will pause in October and raise rates in December, so the recent rebound logic in the global bond market, especially the long-term government bond market, is based more on a slight easing in oil prices and the return of incremental funds driven by persistently surging yields, and cannot be directly interpreted as the start of a full rate-cut trade. Overweight equities, underweight credit bonds: Goldman Sachs Group, Inc. bets on resilient technology earnings growth and valuation repair The allocation of Goldman Sachs Group, Inc. has a clear hierarchy: for equities, it shows the most optimistic stance of overweight at both the 3-month and 12-month horizons; for credit bonds, it shows an underweight stance; cash is overweight in the short term, the government bond market is overweight at the 12-month horizon, commodities are overall neutral, and gold is overweight. Within equities, it prefers the United States, Japan, and Asia-Pacific excluding Japan, and is underweight Europe; within credit, it prefers U.S. dollar investment grade and high yield, and is underweight euro credit, which is not contradictory to the broad underweight in credit. The Goldman Sachs Group, Inc. strategist team's 3-, 6-, and 12-month target levels for the S&P 500 index are 8,000, 8,300, and 8,700 points, respectively, with expected total returns in the forecast chart of 5.2%, 9.4%, and 15.3%, including dividends; the 12-month expected total return for Asia-Pacific excluding Japan is 29.6%. Cross-asset forecasts also include a 12-month U.S. 10-year Treasury yield of 4.44%, gold at US$5,235, and Brent crude at US$75. The portfolio logic of Goldman Sachs Group, Inc. is to continue participating in the sustained earnings growth trajectory of technology stocks led by the semiconductor sector, while retaining cash, government bonds, and gold to hedge against event shocks. South Korean memory chip stocks and the KOSPI index, in which the two memory chip giants SK Hynix and Samsung Electronics carry a 50% weight, provide a prominent example of this expectation gap. Another Goldman Sachs Group, Inc. South Korea market strategy report lowered its KOSPI target to 9,000 points from 12,000 points, but as of the report's weekend timing it still implied more than 60% upside; the Goldman Sachs Group, Inc. South Korea strategy team believes that the semiconductor valuation scenario implying a 65% earnings decline in 2027 is overly pessimistic, with Samsung Electronics and SK Hynix at the time trading at only about 3x forward price-to-earnings. The KOSPI was down about 40% from its June high, while forward 12-month earnings forecasts rose about 22% over the same period. The Goldman Sachs Group, Inc. South Korea team noted in the research report that Samsung Electronics and SK Hynix are both currently trading at about 3x forward price-to-earnings, the lowest level in history. Based on the relationship between price-to-book and return on equity revealed by the past 20 years of monthly data compiled by Goldman Sachs Group, Inc., with an R-squared of as high as 72%, the current 2.6x price-to-book of the South Korean memory chip sector implies a 2027 ROE of only 23%, while the market consensus forecast is as high as 45%, showing that the valuation given by the market to South Korean memory chip giants is severely discounted. This divergence is equally prominent at the index level: the KOSPI is down about 40% from its June high, while forward 12-month earnings forecasts rose about 22% over the same period; the KOSPI's record-low forward price-to-earnings of about 4x is at an extreme low among the 18 major trillion-dollar markets covered by the relevant statistics. However, the memory industry's low price-to-earnings may also include concerns that cycle-peak earnings are unsustainable. The key to Goldman Sachs Group, Inc.'s bullish judgment on South Korea's two memory chip giants and the Korean equity benchmark KOSPI is that as long as the actual earnings downgrade is smaller than the pessimism implied by share prices, combined with a decline in risk premium, the South Korean equity market and the two memory chip giants that account for 50% of South Korean market capitalization may achieve strong valuation repair during a period of slowing earnings growth. Global capital has also begun to bet again on the South Korean stock market and memory chips. Fund flow data compiled by Goldman Sachs Group, Inc. show that from October 1 to 23, South Korean retail investors net bought KRW315.4 billion of leveraged products related to the two companies; as of the 22nd, South Korean investors net bought about US$3.548 billion of SOXL (the U.S.-listed ETF code "SOXL," a triple-leveraged long ETF on the Philadelphia Semiconductor Index), accounting for an astonishing 73.9% of net U.S. equity purchases during the same period. The main logic behind the trading opportunities in the South Korean stock market and the memory chip and semiconductor sectors given by Goldman Sachs Group, Inc. comes from actual earnings performance being better than the pessimistic scenario implied by share prices, while the return of leveraged funds reflects that this judgment is being converted into positions. The latest judgment from Morgan Stanley's chief equity strategist Wilson adds a time dimension to the rebound: AI capital availability and costs, AI safety and data center construction obstacles, the midterm elections, and Federal Reserve liquidity are three groups of factors that need to be digested in the coming weeks. He maintains his optimistic year-end S&P target of 8,000 points and emphasizes that "the internal correction in the U.S. stock market that began in June has entered its final tail phase, but the index may still experience one last leg down." He also retains a tactical path of first testing 7,1007,200 points and believes liquidity is both the biggest risk and a potential catalyst for forming the final low. Goldman Sachs Group, Inc. focuses on "improved expected returns for equities after the correction," while Wilson focuses on "which events can end the correction"however, both clearly support investors preparing equity exposure for the year-end market, though Goldman Sachs Group, Inc.'s "8,000 points in three months" and Wilson's "8,000 points by year-end" are forecasts with different time horizons. Why global financial markets are all "watching the semiconductor sector": AI connects earnings, capital demand, and financing costs Understanding this through industry mechanisms, technology stocks have become the market's "anchor" because AI simultaneously affects corporate earnings, real investment, and capital supply and demand. After agent applications expand, GPUs and application-specific integrated circuits (ASICs) handle model computation, CPUs run tools and task orchestration, high-bandwidth memory (HBM) and server DRAM support models and concurrent environments, enterprise SSDs store persistent state, and the entire AI computing infrastructure industry chainincluding networking, power, data center optical interconnect systems, high-performance CPUs, and data center underlying power equipment and cooling systemsjointly ensures the delivery of computing resource services. Muse and Astra, as well as Meta's Boai NKY Medical Muse Spark Open, are expected to jointly further expand the scope of AI agent use; the massive expansion of AI inference workloads they bring will simultaneously increase demand for model inference, tool execution, and state management, while also deepening competitive pressure on some software companies. Accelerators such as GPUs and TPUs handle model computation; high-performance server CPUs run browsers, virtual machines, product search, database queries, and transaction orchestration; HBM and server DRAM carry model data, context, and concurrent working environments; enterprise SSDs store product indexes, task records, and persistent state, while high-speed networking and optical interconnects support distributed data exchange. The procurement budgets of technology giants therefore simultaneously correspond to the revenue of chip, memory, equipment, and energy companies; spending is implemented through cash flow, bonds, equity, and lease financing, which in turn affects credit spreads and funding costs. When the market lowers AI return expectations, the shock is transmitted along the customer financing, equipment orders, supplier earnings, and Asian export chains, and even to the global equity, bond, and foreign exchange markets and commodity markets; when AI financing costs and commercial operating prospects improve substantially, this chain also has the capacity for reverse repair. The asset management business of JPMorgan also points out that the current financing debate is more about capital costs and delivery returns, and low-rated new clouds and high-rated cloud giants clearly differ in their ability to withstand pressure. Goldman Sachs Group, Inc. is still willing to take on equity risk, ultimately supported by three data points: the S&P 500's forward 12-month price-to-earnings has fallen to just 18.6x, below the 10-year average of 19.2x; Asia-Pacific excluding Japan is only 9.5x; and Goldman Sachs Group, Inc.'s estimate of the probability of a U.S. recession over the next year is 15%. Technology earnings forecasts are still being revised upward, although the breadth of upward revisions has cooled. By comparison, U.S. investment-grade and high-yield bond spreads are 89 and 337 basis points, respectively, still below their 10-year averages of 109 and 370 basis pointshigher absolute bond yields do not necessarily mean credit risk compensation is already sufficient. From this perspective, the underlying basis for Goldman Sachs Group, Inc. supporting buying on dips is that strong earnings growth resilience, lower purchase valuations, and significantly reduced positioning crowding have jointly improved expected returns in the equity market; risk appetite falling below zero is only background, not a sufficient condition on its own to trigger buying.