GS Abbas GS US Daily Download

GS Abbas - GS US Daily Download 14 Oct 2026 Ismail Abbas · Goldman Sachs · FICC & Equities 14 Oct 2026

Stat of the day Foreign investors own 18% of the US equity market compared to hedge funds’ 2%. This investor base has remained relatively quiet, with

Foreign investors own 18% of the US equity market compared to hedge funds’ 2%. This investor base has remained relatively quiet, with positioning right below the 50th percentile since 2009

1. The Impact of AI Demand on Inflation - We consider four channels of impact. First, AI has raised software and accessories inflation sharply by boosting prices for memory and other accessories and by contributing to large price increases for software products that now have AI features. But we estimate that most of the roughly 20bp contribution to core PCE inflation from this category reflects mismeasurement that exaggerates the impact of surging accessories prices, a problem that was reduced but not resolved by the recent methodological changes. The failure to adjust software prices for quality improvement also appears to account for some of the category’s contribution. Second, AI-related cost pressures for electronic inputs have led to price increases for computers and other consumer electronics. We estimate that the cost pressures will rise modestly further, contributing roughly 15bp in total to core PCE inflation until late next year. Third, demand for power from data centers has boosted electricity prices. We estimate that this has contributed 5-10bp to core inflation by raising energy costs for companies and an additional 5-10bp to headline inflation through the direct impact on household electricity bills. Fourth, prices for industrial metals used for data center construction have risen substantially, which we estimate has boosted core inflation by about 5bp.

Actionable GS Research Overnight

1. Digital Ads Q3 Preview - Beyond the near-term advertising environment, investor debates around Alphabet and Meta (the two largest names in this industry sub-sector) remain anchored around AI driven capex and capital intensity, potential funding needs, and each company’s positioning/participation across the consumer agent landscape. We continue to see both companies as having a right to win (if executed against) at the platform layer of AI-driven consumer behavior. While investors have gotten more comfortable with current period ROIC on prior period spending (supported by Google Cloud growth and product innovation at Meta), questions remain about the revenue and EBIT contribution required in 2028- 2030 to generate sufficient returns from 2026/2027 capex levels.

2. AMAT Feedback - We attended Applied’s Investor Breakfast at SEMICON West and EPIC Center unveiling on Oct. 12-13, and came away incrementally positive on Applied's path to substantially higher long-term earnings power. We believe the stock's reaction (down 7% amid a sector-wide selloff) may have reflected some level of disappointment given the lack of a specific medium-term WFE forecast and earnings target (prior to 2030). However, we believe the stock is likely to recover as we believe the upcoming earnings season will validate our view that Applied's earnings power is likely to be significantly higher by 2028, given outsized WFE market growth and its outsized exposure to deposition and etch.

3. Payments Preview - Heading into 3Q earnings we are broadly positive on the set up for the group, due to several factors: First, spending volumes have remained robust, defying investors fears around a normalization of spend and ending the quarter on a high note, with September spending trends remaining strong. Second, the broader structural concerns around the group have also trended favorably with several regulatory and disruptive risks fading (see below) and Agentic commerce in particular emerging as a symbiotic growth driver of carded payments. Finally, from a flow of funds perspective, we believe payments stands out as relatively insulated from several broad market concerns, including 1) higher interest rates 2) higher inflation and 3) AI-driven disruption. After several years of multiple compression, the space also stands out as inexpensive…