After a two-month drop of 11%, Goldman Sachs reverses stance and goes long: Is a "golden dip" coming for the semiconductor sector?

Odaily Finance APP has noted that Goldman Sachs made a clear judgment in its latest US semiconductor Q3 earnings preview: most sub-sectors in the semiconductor ecosystem are poised for upward earnings revisions, and the risk-reward profile has significantly improved.

The analyst team led by James Schneider pointed out that over the past two months, the Philadelphia Semiconductor Index (SOX) plunged 11% amid broad risk-off selling, while the S&P 500 rose 4%—it’s this drastic divergence that has turned pre-earnings positioning from “tactically cautious” in Q2 to “more constructive” now.

Equipment & Manufacturing: WFE Spending Visibility Extends to 2028

Goldman Sachs gives its clearest upgrade direction to semiconductor equipment. The report notes that wafer fab equipment (WFE) spending is being locked in by customers ahead of time, and industry order visibility has extended to 2028. Applied Materials (AMAT.US) is listed as one of the top picks, with a target price of $670: Goldman expects the company to raise its long-term margin targets at SEMICON West on October 13, and outline a path for the WFE market toward $300 billion. The following mid-November results are expected to deliver strong performance on the back of DRAM/HBM and advanced logic demand.

Lam Research (LRCX.US) sees an improved risk-reward after a pullback of about 20% in its stock price. Its exposure to GAA (Gate-All-Around) and backside power, increased DRAM share, and NAND upgrade demand offer a threefold catalyst. Goldman assigns it a “Buy” rating with a $380 target price.

In contrast, KLA (KLAC.US) is expected to beat earnings expectations, but with WFE spending biased toward DRAM and relatively limited process control exposure, it is listed as a tactical underperformer.

Compute: Agentic AI is Re-evaluating the Value of CPU and ASIC

Against the backdrop of continued upward revisions to cloud vendors’ capital expenditures, Goldman believes there’s upside for server CPUs (benefiting from rising Agentic AI penetration) and key ASIC projects.

AMD (AMD.US) is the biggest upgrade this round, with its target price raised from $640 to $700 and a maintained "Buy" rating. Goldman expects both Q3 results and guidance to beat expectations, with its 2027 EPS forecast ($17.10) 7% higher than Wall Street consensus. The main catalysts include ramping of its Helios platform in Q4, and demand and pricing improvement in server CPUs driven by Agentic AI.

Cadence (CDNS.US) is seen as the “least afraid of AI disruption”—Agentic tools are driving monetization of EDA software. Goldman expects it to raise its 2026 revenue guidance to around 21% YoY growth. Goldman assigns it a "Buy" rating with a latest target price of $470.

It is worth noting that while Qualcomm (QCOM.US) may modestly beat expectations, Goldman believes market expectations for Agentic AI are too high, suggesting tactical downside risk.

Analog Chips: Recovery Underestimated, Dual Engines from Industrial and Data Center

Goldman directly states that “Wall Street is still systematically underestimating the slope of analog chip recovery,” and prefers companies most exposed to industrial, aerospace/defense, and data center segments. Microchip Technology (MCHP.US) is one of its top picks. Industrial restocking plus data center revenue impact targets $1 billion, with a target price of $115.

NXP (NXPI.US) focuses on automotive demand (especially in China) and plans to double data center revenue, with a target price of $325. SiTime (SITM.US), leveraging MEMS clocks as a quartz replacement and the consolidation of Renesas' clock business, is expected to beat quarterly revenue by about 5%, with a target price of $900.

In contrast, while Texas Instruments (TXN.US) has strong performance, Goldman believes high inventory and depreciation will drag its gross margin under peers, maintaining its "Sell" rating.

Memory: “Money Printing Machine” Under Tight Supply, Prefers HDD & NAND

In memory, SanDisk (SNDK.US) is rated “Buy” with a latest target price as high as $2,200, the highest in the list: NAND has seen no new supply recently, and with enterprise SSD penetration among cloud vendors and broader long-term agreements (LTA), Goldman expects quarterly revenue to exceed guidance midpoint by about 6%.

Seagate (STX.US) receives a “Buy” rating, target price $960. Its HAMR technology transition leads the industry, and post-deleveraging capital return could help further gain HDD share. By contrast, Western Digital is only given a “Neutral” rating, with Goldman clearly stating a “preference for Seagate.”

“Buy” List

In summary, Goldman gives “Buy” ratings to 12 stocks this Q3 earnings season as the core basket for semiconductor allocation:

Computing & EDA: AMD (AMD.US) and Cadence (CDNS.US);

Analog chips: Microchip Technology (MCHP.US), NXP (NXPI.US), SiTime (SITM.US);

Equipment & Materials: Applied Materials (AMAT.US) as a conviction buy, along with Lam Research (LRCX.US), Onto Innovation (ONTO.US), Qnity (Q.US), and Teradyne (TER.US);

Memory: SanDisk (SNDK.US), Seagate (STX.US).

On a tactical level, Goldman is overtly bullish on Applied Materials, Cadence, and Microchip Technology, and flags downside risks for Qualcomm, KLA, and Western Digital; it also maintains “Sell” ratings on Arm (ARM.US), Texas Instruments (TXN.US), Entegris (ENTG.US), and MKS Instruments (MKSI.US), citing overvalued multiples, lagging gross margins, or growth trailing the WFE sector.

Goldman’s core conclusion is that two months of deep correction have eliminated crowded long positions, while fundamentals—advanced WFE spending, Agentic AI boosting compute power, analog restocking, and zero new supply in memory—are all trending up. The Q3 earnings season will be a window for short covering and synchronized upward revisions of earnings estimates.