Goldman Sachs is taking a more constructive view of semiconductor stocks heading into the third-quarter earnings season, identifying three companies it believes could offer attractive tactical opportunities: Applied Materials, Seagate Technology and Microchip Technology.
The investment bank’s view comes after a notable pullback across the semiconductor sector. According to Goldman analysts led by James Schneider, the Philadelphia Semiconductor Index has fallen about 11% over the past two months, while the S&P 500 has gained roughly 4%. Goldman believes that decline has created a more favorable setup heading into upcoming earnings reports.
The firm expects potential upside to earnings estimates across several semiconductor subsectors, particularly semiconductor equipment, computing and storage. Here are the three stocks Goldman is highlighting.
Applied Materials goldman
Applied Materials is one of Goldman’s preferred semiconductor equipment plays ahead of earnings.
The firm expects the company to provide a stronger growth outlook and potentially raise its margin targets at SEMICON West on October 13. Goldman also anticipates a solid quarterly report, supported by demand for DRAM and advanced logic technologies.
Analysts expect management to discuss the longer-term opportunity in wafer fabrication equipment, with the market potentially growing toward $300 billion over time.
However, expectations are already elevated. Applied Materials shares had gained about 12% over the previous week when Goldman issued its view, meaning investors may already be pricing in some positive developments.
Seagate Technology goldman
Seagate Technology is Goldman’s second tactical semiconductor-related pick, with the bank expecting a strong quarter driven by improving hard-disk-drive pricing and supportive demand.
Goldman estimates roughly 2% revenue upside compared with Wall Street expectations and sees company guidance coming in approximately 3% above consensus.
The analysts also highlighted Seagate’s supply strategy and progress with heat-assisted magnetic recording, or HAMR. The technology is designed to increase hard-drive storage capacity, and Goldman believes Seagate’s progress could help the company capture additional market share.
Investors will be watching several key areas during the company’s results, including HDD pricing, HAMR shipments and capital returns.
Microchip Technology
Microchip Technology rounds out Goldman’s three tactical picks.
The firm expects broad strength across Microchip’s end markets, particularly data centers and aerospace and defense. Goldman estimates approximately 1% revenue upside and expects gross margins to recover toward 66% by the end of 2026.
Another factor behind the bullish view is the potential recovery in Microchip’s analog business. Goldman believes Wall Street may still be underestimating the pace of that recovery and described Microchip as one of its favored names.
The bank’s fiscal 2027 earnings estimate is approximately 3% above consensus expectations.
Goldman Also Flags Risks in Other Chip Stocks
Goldman Sachs isn’t bullish across the entire semiconductor group. The bank identified Qualcomm, KLA and Western Digital as stocks carrying tactical downside risks and rates all three Neutral.
According to Goldman, Qualcomm may face elevated expectations surrounding agentic artificial intelligence. KLA could lag some peers if semiconductor spending remains more heavily concentrated on DRAM, while Western Digital could underperform Seagate.
The differing views highlight how investors may be approaching this earnings season selectively rather than treating the entire semiconductor sector as a single trade.
What Investors Should Watch
With semiconductor stocks coming off a significant pullback, earnings results and forward guidance could play an important role in determining the sector’s next move.
For Applied Materials, investors will likely focus on semiconductor equipment demand, margins and commentary on advanced logic and DRAM. Seagate’s results could hinge on HDD pricing, demand and HAMR progress, while Microchip’s outlook will provide clues about the strength of the broader analog-chip recovery.
Goldman’s three selections Applied Materials, Seagate Technology and Microchip Technology reflect its view that recent weakness in semiconductor stocks may have created a more favorable tactical setup ahead of earnings. However, earnings-related trades remain subject to significant volatility, and Goldman’s view should not be interpreted as a guarantee of future stock performance.