Healthy earnings backdrop remains due to AI investment and hyperscalers: Goldman Sachs AM

• US EPS growth for 2026 is tracking around 12%, above earlier expectations, indicating a healthy earnings backdrop.
• Significant AI investment is expected, with hyperscalers investing almost $600 billion in CapEx through 2026 (45% higher than last year), but differentiation based on ROI and cash generation will be crucial.
• Asian markets like Taiwan (50%+ earnings growth) and Korea (100%+ earnings growth) show strong order books in memory and semiconductors, indicating robust demand.
• Near-term concerns include market valuation, consumer sentiment, central bank policies, and geopolitical risks like the Middle East conflict and oil prices ($105/barrel).
• Despite near-term energy shocks and geopolitical tensions, these are seen as dislocations rather than fundamental deteriorations of Asia's growth trajectory.
• The US market is considered relatively better insulated from commodity challenges, and there's a favorable long-term perspective on non-US and emerging markets due to capital reallocation.

Goldman Sachs Asset Management maintains a bullish long-term outlook for equities, driven by strong earnings expectations (12% EPS growth for US in 2026) and significant AI investments, particularly in hyperscalers and Asian tech. While near-term market volatility and geopolitical risks exist, these are viewed as dislocations rather than fundamental deteriorations, creating opportunities in non-US and emerging markets.