Customers of Wall Street’s most prestigious firm, not to mention investors in general, are worried that US equity benchmarks can no longer be described as “a market of stocks.”
Rather, between the concentrated nature of this year’s gains and the synonymity of the AI narrative and momentum strategies, the US equity market’s best characterized as “one big trade.”
That’s what Goldman’s hearing from clients. They aren’t wrong. And I’d be remiss not to note that given the heft of America’s largest companies in cap-weighted global indexes, and the extent to which a handful of foreign semi names are likewise overrepresented due to recent exponential gains, it’s fair to level the same criticism (if that’s what it is) against global equities.
I realize this is well-worn territory, but as you’ve doubtlessly noticed, the situation’s becoming more acute virtually by the day. Just last week, for example, the SOX traded at a 62% premium to its 200-DMA, earning the 2025-2026 semi surge a spot on one bank’s list of history’s largest bubbles.
With all that in mind, the figures below, from Goldman, are worth a look.
The chart on the left shows you the bank’s momentum factor (equal-weighted, long/short construction for top- and bottom-quintile performers using 12-month rolling returns). It’s inflected this year like a bat out of hell. Or like Intel out of obscurity.
At ~25%, the three-month return for the momentum factor counts among the strongest such runs ever, the bank’s Ben Snider noted, and it coincides with hedge funds dialing up gross leverage and net exposure to momentum near post-pandemic highs.
As you can imagine, and as alluded to above, the momentum trade in 2026 is just the AI trade. As Snider detailed, semis, tech hardware and capital goods stocks benefiting from data center construction are “the largest tilts in the long leg.” The short leg’s dominated by software and commercial services, which is to say names seen vulnerable to agentic disruption (i.e., the whole “SaaSpocalypse” narrative).
Given that, the momentum factor’s basically tick-for-tick with a Goldman AI long/short pair, as illustrated on the right.
“Few sectors have avoided being caught up in the ‘One Big Trade’ of AI momentum,” Snider wrote, adding that although “average correlations across S&P 500 stocks are near record lows, recent conversations with PMs have centered on the challenge of finding investment opportunities that are not tethered to a view on AI.”
Commenting in his own note on Monday, SocGen’s Andrew Lapthorne reminded investors that “exceptionally strong returns” for momentum strategies are often just as much a function of the short leg as the long.
As the figure on the right shows, that’s not quite the case in 2026, although the short leg is contributing.
“Strong momentum instils the notion of bull markets and optimism but is often driven by both very good and very bad news co-existing in the market at the same time,” Lapthorne wrote, underscoring the point.
“During the dot-com bubble, disinflation in the aftermath of the Asian crisis created major profit problems for many cyclical stocks, making the tech-growth story seemingly appear to be a haven,” he went on. “Today, we have the contrasting impact of AI and the Iran war to contend with.”
