While the buzz around artificial intelligence seems to dominate the stock market landscape, Goldman Sachs insists there are still valuable investment opportunities outside the tech realm. The AI sector's power has driven both the S&P 500 and the tech-heavy Nasdaq Composite to new all-time highs multiple times this year, with the most recent records being set just last week. In a report dated May 15, Goldman Sachs analysts acknowledged the difficulty investors face in identifying opportunities that are not heavily tied to technology and AI. "The current market dynamics suggest that AI and momentum are closely linked, influencing the S&P 500 in a way that leads many to perceive it as 'one big trade' rather than a diverse 'market of stocks,'" noted Goldman’s chief U.S. equity strategist. "We encourage investors to focus on equities that demonstrate fundamental support from earnings growth and revisions, regardless of whether those earnings arise from AI or other factors."
Highlighting a list of Russell 1000 stocks, the report identifies companies with low price sensitivity to both the AI sector and market expectations surrounding economic growth. The selected stocks have recently enjoyed positive earnings revisions from analysts. For instance, Eli Lilly has seen a decline of about 1% this year, with Goldman estimating that only 9% of its returns stem from the broader U.S. economic landscape and AI influences. Earlier this month, Morgan Stanley reaffirmed its overweight rating on Lilly, projecting a price target of $1,344, suggesting an upside of 26.2% from the previous Friday's closing price. Analyst Terence Flynn commented on Lilly's sales performance outside the U.S. for the treatment of type 2 diabetes, noting, "The last four quarters have exceeded consensus expectations, driven by market share gains and an uptick in GLP-1 adoption."
On the other hand, cybersecurity firm Fortinet has surged by 68.7% this year, with Goldman attributing 19% of this growth to the economic outlook and AI developments. BTIG analyst Gray Powell upgraded Fortinet from neutral to buy after the company reported impressive first-quarter results, describing revenue as 7% above expectations and operating income 22% higher than forecasts. Fortinet's shares closed at $133.93 on Friday, surpassing Powell's price target of $125. "Surprisingly, the magnitude of the beat exceeded our expectations. We now believe FTNT can maintain mid-teens revenue growth for the next several years," he remarked.
Goldman Sachs views Chewy, the pet food and supplies retailer, as being only 11% influenced by AI and the U.S. economic landscape despite its 37% drop in shares this year. Nonetheless, Wolfe Research highlighted Chewy as one of its leading internet stock choices in a note last week. Analyst Shweta Khajuria acknowledged potential risks in the company's guidance for fiscal year 2026 but considers the current share price reflects conservatism and possible upside. She assigned an outperform rating with a price target of $39, nearly double Chewy's closing price of $20.73 on Friday.
