Woofun AI reports that Goldman Sachs has issued a strategic pivot for the second half of the year, advising investors to transition from 'buying sectors' to 'picking companies' within the AI market. The report emphasizes that while the firm remains bullish on the overarching AI cycle, the methodology for capturing value must evolve as the market matures.

The current technology cycle shows no indication of peaking, according to the bank’s assessment. Signals that typically mark the end of an upcycle—such as supply exceeding demand or a deceleration in technological evolution—are absent. Goldman Sachs characterizes this period as one of the largest and longest-lasting technology upcycles in history. Although related stocks experienced profit-taking after entering July, the firm views this not as a trend reversal, but as a healthy adjustment following rapid price appreciation.

Three core investment themes define the current strategy. First, AI servers and data center-related hardware stocks remain primary targets due to sustained demand. Second, in segments where supply and demand have tightened, investors must conduct a fine assessment of individual stock risk and return rather than relying on broad exposure. Third, as market risk appetite declines, software and IT service stocks are positioned as a defensive allocation, leveraging the AI disruption wave to explore new business opportunities.

To determine if the cycle is nearing its end, two specific metrics are monitored. The first is whether semiconductors and electronic components in the Asian AI supply chain shift from supply shortages to oversupply. The second is whether industry competition becomes price-driven rather than performance-driven due to slowing innovation. Currently, neither signal has appeared, reinforcing the view that the cycle remains intact.

Future drivers include the ongoing expansion phase of AI infrastructure and the emergence of new applications such as physical AI and edge AI. These developments are expected to continue driving AI server and data center construction, thereby extending the technology cycle. Consequently, recent profit-taking is interpreted as a healthy pullback rather than a fundamental reversal in the underlying growth trajectory.

The scope of industry prosperity is expanding beyond traditional hotspots. Supply and demand tightness is gradually spreading from popular areas such as storage and optical communication to more semiconductor sub-industries. This broadening effect suggests that the benefits of the AI boom are permeating deeper into the supply chain, creating opportunities across multiple layers of the hardware ecosystem.

Stock selection criteria are shifting from 'buying the right industry' to 'picking the right company.' Firms worth attention typically share specific characteristics: they directly benefit from product price increases, possess strong capacity for expansion to seize profit opportunities from supply and demand tightness, and have AI business growth potential not yet fully reflected in market valuations. Some also possess unique catalytic factors that the market has not fully priced in.

Valuation logic is evolving from beta to alpha. After an overall increase in valuations, future excess returns are more likely to stem from a company's own competitiveness rather than industry beta. Investors are advised to focus on entities with unique advantages that can generate alpha in a maturing market, rather than relying on the broad upward momentum of the AI theme.

A new defensive strategy focuses on software, IT services, and internet companies. Instead of avoiding the technology sector, investors should target firms creating new business opportunities through AI. Generative AI is driving demand for AI consulting, data infrastructure construction, and cybersecurity.

Additionally, AI tools are enhancing development efficiency and reducing costs, which is expected to improve the profitability of some software and IT service companies.

Concerns about AI undermining content value are easing, as the technology is increasingly viewed as a tool for enhancing commercialization efficiency and operational efficiency. This perspective improves the growth logic for internet and digital content companies. In the second half of the year, Asian technology investments should adhere to the AI theme but adopt a balanced approach: focusing on AI infrastructure and hardware supply chains for offense, while allocating to software and IT services for defense in a more volatile market environment.