Goldman Sachs Just Issued a Warning About the AI Stock Rally. Here’s What It Means for Your Portfolio

TLDR

• The S&P 500 is up 10% this year, but 85% of those gains came from tech stocks alone
• Nvidia now makes up 9% of the S&P 500 and drove 20% of the index’s total return
• Goldman Sachs says the market looks like “one big trade” tied to AI momentum
• S&P 500 companies posted 17% earnings growth in Q1, with capex up 38% year-over-year
• Goldman’s year-end S&P 500 target remains at 7,600, suggesting limited upside from here

The S&P 500 has climbed 10% in 2025, but Goldman Sachs is raising a flag about how narrow that rally has become.

In a May 15 report, Goldman strategist Ben Snider said technology stocks alone accounted for 85% of the index’s return this year. Strip out tech, and the rest of the S&P 500 rose just 3%.

Nvidia has been the single biggest driver. The chipmaker now represents 9% of the S&P 500 by market cap and contributed 20% of the index’s total return in 2025.

Goldman described the market as increasingly dominated by one theme: AI. The bank’s momentum factor surged 25% over the past three months, one of the sharpest runs on record.

The concern is not just about concentration. Goldman pointed to similar episodes in 1998, 1999, 2015, and 2021, when strong momentum rallies eventually reversed and broader market returns weakened.

Earnings Are Holding the Rally Up

Goldman was clear that this rally is not purely speculative. S&P 500 companies posted 17% year-over-year earnings growth in Q1, excluding one-off items.

Forward 12-month earnings estimates have risen 13% this year, even as the price-to-earnings ratio contracted by 4%.

Much of the upward earnings revision has been concentrated in AI infrastructure companies and energy producers. Outside those sectors, 2027 earnings estimates for the rest of the S&P 500 have been flat.

Goldman also noted that earnings revision breadth improved across every sector last month. That suggests the rally is not limited purely to the biggest tech names.

Capital spending is one reason earnings expectations are rising. S&P 500 companies increased capex 38% year-over-year in Q1, compared to just 1% growth in share buybacks.

Goldman forecasts capex will reach roughly $2 trillion in 2026, with AI hyperscalers alone potentially spending around $755 billion.

Where Goldman Sees Lower-Risk Opportunities

Goldman highlighted consumer staples as the sector with the least exposure to AI momentum trading. Health care and real estate also showed low correlation to the AI trade.

The bank published a list of stocks with positive earnings revisions but low sensitivity to AI trading swings. That list included Eli Lilly, Reddit, Newmont, Archer-Daniels-Midland, and Casey’s General Stores.

Goldman also suggested investors overexposed to momentum trades consider holding some lower-momentum stocks as a hedge. Historically, lagging stocks have outperformed during sharp momentum unwinds.

The 10 largest companies in the S&P 500 now account for 41% of the index’s market cap and 34% of its earnings. The median S&P 500 stock trades 13% below its own 52-week high.

Goldman maintained its year-end 2026 S&P 500 target of 7,600, implying limited upside from current levels.

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