Microsoft Added to Goldman Sachs Conviction List, Broadcom Removed

Goldman Sachs has significantly reshuffled its U.S. Conviction List for August, adding technology giant Microsoft and five other companies while removing semiconductor firm Broadcom and three others. The bank's update, outlined in a note to clients, highlights a strategic pivot towards what it calls "Stocks for a broadening market."

Key List Changes

The closely watched list of top stock recommendations saw a total of ten changes, reflecting the firm's latest views on companies positioned for outperformance. The moves suggest a potential shift in perceived market leadership away from a narrow group of tech names.

• Added to the list: Applied Materials (AMAT), Delta Air Lines (DAL), Microsoft (MSFT), O'Reilly Automotive (ORLY), Viking Holdings (VIK), and United Parcel Service (UPS).
• Removed from the list: Broadcom (AVGO), Dick's Sporting Goods (DKS), Johnson & Johnson (JNJ), and ServiceNow (NOW).

Rationale for the Additions

Goldman provided specific rationales for each new name, with a strong focus on Microsoft's evolving position in artificial intelligence. Analyst Gabriela Borges highlighted that the AI revolution is shifting from training and infrastructure toward enterprise application, a phase where Microsoft is poised to excel.

The firm pointed to accelerating growth in Microsoft's Azure cloud platform, improving AI unit economics, and the monetization of its Copilot products as key drivers. Goldman projects Microsoft's EPS growth will accelerate from 12% in fiscal 2027 to over 20% by fiscal 2029.

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Other additions were selected for specific industry tailwinds:

• Delta Air Lines: Seen as "best positioned to capitalize on the industry's newfound pricing power," with Goldman forecasting 300 basis points of margin expansion over two years.
• UPS: The bank anticipates a revenue and profit inflection point for the logistics company after three years of erosion.
• Applied Materials: Believed to be in a strong position to gain market share at top DRAM makers and leading foundries.

Market Implications

Changes to influential buy-lists like Goldman's Conviction List are monitored by investors for signals about shifting sector preferences. The removal of a major semiconductor company like Broadcom and the addition of companies in industrials (UPS), airlines (DAL), and consumer services (ORLY, VIK) supports the firm's theme of a broadening market.

This rotation suggests that Goldman Sachs's analysts see investment opportunities expanding beyond the core technology and AI-related stocks that have dominated market performance recently.