Goldman Sachs is doubling down on artificial intelligence, highlighting infrastructure and data management as prime investment opportunities despite market concerns over high valuations.
Brook Dane, co-head of public tech investing at the firm, pointed to companies like Nvidia (NASDAQ:NVDA), Taiwan Semiconductor Manufacturing Co (NYSE:TSM), Snowflake (NYSE:SNOW), and HubSpot (NYSE:HUBS) as beneficiaries of the AI boom, signaling that selective stock picking in this sector could yield significant returns as enterprise adoption and capital spending accelerate.
Dane reaffirmed his optimism on AI during an appearance on CNBC’s Money Movers, highlighting opportunities across AI infrastructure, data management, and enterprise applications.
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Addressing concerns over potentially inflated AI valuations, Dane emphasized the role of active investing in identifying value. “We’re finding plenty of stocks to buy right now in the market for our clients that are priced at really attractive rates. For example, look at Nvidia. We all know Nvidia is getting 70 cents of every dollar of capex being spent. Capex is likely to be up something north of 30% in the next year. It’s trading at like a 3.2% free cash flow yield. That seems like an attractive entry place. That doesn’t seem like a bubble. It doesn’t seem like it’s extended.”
He added that while some areas of the market are overheated, disciplined selection can uncover compelling opportunities. Nvidia remains a top pick for Goldman Sachs.
AI Picks Beyond Nvidia
Beyond chipmakers, Dane outlined three key areas for investors to watch in AI. First, the infrastructure layer, including companies like Nvidia and TSM, which are building the hardware to run AI models.
Second, the data and security segment, where firms such as Snowflake, Zscaler (NASDAQ:ZS), and Varonis Systems (NASDAQ:VRNS) benefit from efforts to organize, secure, and govern enterprise data for AI applications.
The third, more nuanced area is AI applications. Dane noted opportunities exist where companies leverage durable data advantages to drive growth, even amidst frontier AI competition.
Examples include Samsara (NYSE:IOT), which specializes in fleet management software and telematics, and HubSpot, recently partnering with OpenAI on an agentic model builder.
“HubSpot has this great advantage of being the tech provider for many small businesses…they are going to look to HubSpot to help them guide them through this confusing period of time around AI,” Dane said.
On capital expenditure trends among hyperscalers, Dane acknowledged projections of slower growth, estimating roughly 30% capex expansion next year among the six largest U.S. providers.
He remained confident the market can absorb this slowdown, emphasizing the durability of growth through 2027 and 2028 as the AI investment cycle continues.
Dane also highlighted the enterprise focus of recent AI conferences, reinforcing the importance of data and practical applications for businesses.
While OpenAI captures much of the spotlight, he pointed to multiple players, including Meta Platforms (NASDAQ:META), Alphabet’s (NASDAQ:GOOG) (NASDAQ:GOOGL) Google with Gemini, and major U.S. hyperscalers like Microsoft (NASDAQ:MSFT), Amazon (NASDAQ:AMZN), and Oracle (NYSE:ORCL), investing heavily in AI infrastructure and frontier models.
China Versus U.S.
Looking internationally, Dane observed that China and the U.S. are likely to develop separate AI ecosystems with distinct winners, noting aggressive spending from Chinese firms. In contrast, other global markets are expected to rely more heavily on U.S. players to drive enterprise AI expansion.
For investors, Dane’s message is clear: opportunities lie not in hype, but in infrastructure, data, and strategically positioned applications across both domestic and international markets.
Price Action: NVDA stock was trading higher by 2.18% to $189.07 at last check Wednesday.
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