Goldman Sachs: US equities rotate from AI to the old economy; Amphenol joins the November Conviction List

What changed in US equities in October?

In October, the S&P 500 fell 0.9% and the Nasdaq Composite fell nearly 7%, while the S&P 500 Equal Weight Index rose about 5%. Goldman Sachs observed a rotation from large technology stocks into old-economy companies such as manufacturers.
The pause in the AI infrastructure trade came as investors worried about the sustainability of the public credit financing required for projects and began paying closer attention to large cloud providers’ returns on AI investment. Goldman Sachs also noted that cloud revenue fell short of expectations because of supply chain bottlenecks.
Goldman Sachs expects earnings per share at S&P 500 companies to grow 18% in 2027, a slower but still solid pace. With interest rates and oil prices remaining relatively high and the boost from AI investment weakening, valuation expansion may be difficult, so the bank places greater emphasis on long-term growth and upward earnings revisions.

Goldman Sachs added Amphenol to its US Conviction List in November and removed DoorDash on 29 October; the updated list contains 23 stocks. The list is selected from stocks the bank rates Buy, and inclusion or removal does not necessarily mean a rating change.
As of October, 135 stocks had been included in the list since its inception. Based on each stock’s performance while on the list, 47% outperformed the S&P 500 and 48% outperformed the S&P 500 Equal Weight Index. These figures measure the share of stocks that beat each benchmark.
Individual stock performance diverged sharply: Celestica’s share price fell 26.5% in October, but its adjusted operating profit disclosed that month was 10% above market expectations, and its 2027 revenue guidance was 15% above market consensus.

Amphenol sells connectors and electronic components, with data centers accounting for approximately 45%–50% of its revenue; end markets including industrial, automotive, and aerospace and defense also provide demand. Goldman Sachs believes diversified end markets help keep revenue relatively predictable.
Fiber optics are expected to grow faster than copper cables in data centers over the long term, but Goldman Sachs notes that the company offers both types of product and that copper cables also have other uses. After acquiring related CommScope businesses in January, Amphenol expanded its fiber-optic business and raised its fiber-optic revenue target twice, following its second- and third-quarter results.
Goldman Sachs expects copper cable and fiber-optic growth to drive another increase of more than 60% in the company’s IT datacom business in 2027. It also expects total company revenue to rise about 30% in 2027 and capital expenditure to increase about 5%–10%. Growth from acquisitions and strong free cash flow conversion are also part of its assessment.

Goldman Sachs analysts expect Amphenol’s 2027 earnings per share to be 3.90 dollars, 9% above the mean market consensus. The difference mainly reflects more optimistic assessments of AI opportunities related to copper cable and fiber optics, and growth in aerospace and defense and industrial markets.
The bank expects an improving relationship between prices and costs and operating leverage to drive further operating profit growth in 2027. Its 12-month price target is 122 dollars, based on normalized earnings per share of 4.35 dollars and a price-to-earnings multiple of 28 times; revenue growth, margins, US-China trade policy and acquisition execution are the main risks.