3 tactical chip stocks to buy ahead of earnings, according to Goldman

Investing.com -- Goldman Sachs said it sees a more constructive trading setup for semiconductor stocks heading into third-quarter earnings, after a sector pullback it attributed to significant de-risking, and named Applied Materials, Seagate and Microchip as tactical ideas.

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Analysts led by James Schneider said the sector has fallen sharply over the past two months, with the SOX index down 11% against a 4% gain for the S&P 500. That is "in stark contrast to the 2Q setup," when the bank signaled a more cautious tactical outlook ahead of results. Goldman sees estimate upside across most sub-sectors, particularly semiconductor equipment, compute and storage.

Goldman expects Applied Materials to raise its margin targets and give a robust growth outlook at SEMICON West on October 13, ahead of mid-November earnings. The analysts expect a strong report driven by DRAM and advanced logic, with management speaking to a wafer fab equipment market growing toward $300 billion over time. The stock rallied about 12% in the past week, so expectations are elevated.

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For Seagate, Goldman forecasts a strong quarter on positive hard disk drive pricing and a supportive demand environment. It projects about 2% revenue upside and guidance roughly 3% above the Street. The analysts cited Seagate's "prudent supply strategy and advanced HAMR progress relative to competitors," which they said position the company for incremental share gains. Investors will focus on capital returns, HAMR volumes and HDD pricing.

Lastly, Goldman expects broad strength across end markets for Microchip, led by datacenter and aerospace and defense, with about 1% revenue upside and gross margin recovering to roughly 66% by the end of 2026. Analysts believe "the Street continues to under-model the analog recovery," calling Microchip "among our favorite names." Goldman's fiscal 2027 earnings estimate is about 3% above consensus.

The Wall Street giant also flagged downside risk tactically for Qualcomm, KLA and Western Digital, all rated Neutral. Analysts said Qualcomm may be ahead of itself given strong expectations tied to agentic AI, KLA's results may lag peers as spending skews toward DRAM, and Western Digital should underperform Seagate.

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