After a two-month plunge of 11% in the SOX, Goldman Sachs flips bullish: Is the semiconductor sector's "golden pit" here?

Notice that Goldman Sachs Group, Inc. has offered a strikingly clear judgment in its latest U.S. semiconductor Q3 preview report: most segments of the semiconductor ecosystem will see upward earnings estimate revisions, and the risk-reward ratio has improved significantly. The analyst team led by James Schneider pointed out that over the past two months, the Philadelphia Semiconductor Index (SOX) plunged 11% amid large-scale risk-averse selling, while the S&P 500 rose 4% over the same periodit is precisely this extreme divergence that has completely shifted the trading setup ahead of Q3 earnings from "tactical caution" in Q2 to "more constructive." Equipment and Manufacturing: Visibility into WFE Spending Extended to 2028 Goldman Sachs Group, Inc.'s most explicit upward revision was for semiconductor equipment. The report noted that wafer fab equipment (WFE) spending is being locked in early by customers, and industry order visibility has been extended to 2028. Applied Materials (AMAT.US) was named as one of the top picks, with a $670 price target: Goldman Sachs Group, Inc. expects it to raise its long-term margin targets at SEMICON West on October 13 and lay out a path for the WFE market toward $300 billion, followed by a strong earnings report in mid-November driven by DRAM/HBM and advanced logic demand. Lam Research (LRCX.US), after a roughly 20% share price pullback, offers a better risk-reward, with its deposition/etch exposure related to GAA gate-all-around and backside power delivery, DRAM share gains, and NAND upgrade demand forming a triple driver. Goldman Sachs Group, Inc. assigned it a "Buy" rating with a $380 price target. By contrast, KLA Corporation (KLAC.US), although expected to beat quarterly expectations, was listed as a tactical underperformer due to WFE spending skewing toward DRAM and its relatively insufficient process control exposure. Computing Power: Agentic AI Is Repricing the Value of CPUs and ASICs Against the backdrop of continuously upward-revised cloud capex, Goldman Sachs Group, Inc. believes both server CPUs (benefiting from rising Agentic AI penetration) and key ASIC projects have upside. AMD (AMD.US) is the name with the largest upward revision this round, with its price target raised from $640 to $700, maintaining a "Buy" rating. Goldman Sachs Group, Inc. expects both its Q3 results and guidance to beat expectations, with 2027 EPS forecast at $17.10, 7% above Wall Street, with the core catalysts being the Helios platform ramping from Q4, Agentic AI-driven server CPU demand, and improved pricing. Cadence (CDNS.US) is seen as the name "least afraid of AI disruption"Agentic tools are driving EDA software monetization. Goldman Sachs Group, Inc. expects it to raise its 2026 revenue guidance to about 21% year-over-year growth. Goldman Sachs Group, Inc. assigned it a "Buy" rating with a latest price target of $470. Notably, although Qualcomm (QCOM.US) may slightly beat expectations, Goldman Sachs Group, Inc. believes the market's expectations for Agentic AI are too high, creating tactical downside risk. Analog Chips: Recovery Is Underestimated, with Industrial and Data Center as Twin Engines Goldman Sachs Group, Inc. stated bluntly that "Wall Street is still systematically underestimating the slope of the analog chip recovery," and prefers companies with the greatest industrial, aerospace/defense, and data center exposure. Microchip Technology Incorporated (MCHP.US) is one of its most favored names, with industrial restocking combined with data center revenue targeting the $1 billion mark, and a price target of $115. NXP Semiconductors NV (NXPI.US) focuses on automotive demand (especially in the China market) and a plan to double data center revenue, with a price target of $325; SiTime (SITM.US), leveraging the logic of MEMS timing replacing quartz and the consolidation of Renesas' timing business, is expected to beat quarterly revenue expectations by about 5%, with a price target of $900. In contrast, although Texas Instruments Incorporated (TXN.US) has strong results, Goldman Sachs Group, Inc. believes high inventory and high depreciation will drag its gross margin below peers, maintaining a Sell rating. Memory: A "Money Printer" Under Tight Supply, Preferring HDD and NAND In the memory sector, SanDisk (SNDK.US) received a "Buy" rating with a latest price target as high as $2,200, the highest on the entire list: with no new NAND supply in the near term, combined with enterprise SSD penetration at cloud providers and expanding long-term agreement (LTA) coverage, Goldman Sachs Group, Inc. expects its quarterly revenue to beat the midpoint of guidance by about 6%. Seagate (STX.US) received a "Buy" rating with a price target of $960. Leading peers in the HAMR technology transition, combined with capital return capacity after deleveraging, it is expected to continue capturing HDD share; by comparison, Western Digital Corporation received only a "Neutral" rating, with Goldman Sachs Group, Inc. explicitly stating it "prefers Seagate." "Buy" List Overall, Goldman Sachs Group, Inc. issued 12 Buy-rated stocks this Q3 earnings season, forming the core basket of its semiconductor allocation: Computing power and EDA: AMD (AMD.US) and Cadence (CDNS.US); Analog chips: Microchip Technology Incorporated (MCHP.US), NXP Semiconductors NV (NXPI.US), SiTime (SITM.US); Equipment and materials: Applied Materials (AMAT.US) on the conviction buy list, also including Lam Research (LRCX.US), Onto Innovation (ONTO.US), Qnity (Q.US), Teradyne, Inc. (TER.US); Memory: SanDisk (SNDK.US), Seagate (STX.US). On a tactical level, Goldman Sachs Group, Inc. is explicitly bullish on Applied Materials, Cadence, and Microchip Technology Incorporated, and flagged downside risks for Qualcomm, KLA Corporation, and Western Digital Corporation; it also maintained "Sell" ratings on Arm (ARM.US), Texas Instruments Incorporated (TXN.US), Entegris (ENTG.US), and MKS Instruments (MKSI.US), citing stretched valuations, gross margin underperformance, or growth trailing the broader WFE market. Goldman Sachs Group, Inc.'s core conclusion is that the two-month deep correction has already washed out crowded long positions, while fundamentalsWFE spending pulled forward, Agentic AI driving computing power, analog restocking, and zero new memory supplyare collectively turning upward. The Q3 earnings season will be a window of resonance between short covering and upward earnings revisions.