The New AI Trades

If you look at an index like the S and P 500, you'd think it's been a quiet start to the year for US stocks. But there have been seismic shifts under the surface with soft force stocks in particular moving dramatically. So what's behind these moves, and what do they tell us about the state of this long running bull market? I'm Alison Nathan, and this is Goldman Sachs Exchanges. Today, I'm sitting down with Ryan Hammond, a portfolio strategist in Goldman Sachs Research. Ryan, welcome back to the program.

Thanks for having me.

So, Ryan, let's start where the price action has been really volatile in recent days, software stocks. Put some numbers around these moves. Give us some context about what we've seen.

Yeah. A group of software stocks is down about 25% to start the year. Some of that selling pressure started earlier than 2026. These stocks are down more than 30% from their highs in October. But most of the selling pressure has occurred in the last week or two. If you think about it in a valuation context, these stocks are super popular among investors, in part because they're fast growing, high margin businesses, but that is coming under some scrutiny from investors. And so, you know, a couple of weeks ago, these stocks traded at a forward earnings multiple of about 35x because of those attr

That is a major, major move. But it's not just these software stocks that have seen a lot of action in recent days. Other stocks, really for, I think, similar reasons, which we'll talk about, have also come under pressure. Talk to us a little about what other sectors are getting hit.

Yeah. We've seen big selling pressure in spaces like publishing, advertising, media, legal services, IT consulting services. Anything that's involved in data and services is really coming under pressure. And these are traditionally industries that have not traded with a very high correlation to the software space. And so it's clear that AI disruption risk is really the common thread throughout a lot of these industries selling off in recent weeks.

Right. But this AI disruption risk, it's been on investors' minds for some time now. So why now for these moves?

That's right. We've been discussing this with investors for many years. And, you know, we've identified a couple of proximate risks that we think are really key. Google released its Genie three model, which had some tools around gaming. So you saw some selling pressure among the gaming and advertising stocks following the launch there. You then had Claude's co work tool that had a bunch of plug ins related to some of these services industries that led to the selling pressure you saw in legal services and some of those other industries. And even as of the last day or two, you've seen insurance

And our answer is we don't know at this point, right? A lot has to happen for us to understand how that's going to evolve.