M&A activity to accelerate this year despite war disruption, Goldman Sachs says

Goldman Sachs (CEO David Solomon) expects an upswing in M&A activity this year, citing anticipated monetary easing, fiscal stimulus in developed economies, increased capital investment in AI and a more balanced U.S. regulatory regime as key drivers. Solomon warned the U.S.-Israeli war on Iran is disrupting sentiment and that a protracted conflict or other exogenous shock could reverse the positive trend. He also called for a long-term U.S.-China reset amid rising efforts to ease bilateral tensions and noted President Trump delayed a Beijing visit due to the war.

Analysis

An uptick in deal activity disproportionately benefits the top quartile of advisers, not the mid-market: advisory fees concentrate and trading desks capture elevated volatility-driven spreads during active processes. For a large bank, this translates into low-capex revenue growth with high operating leverage — a 10% bump in announced global deal volume has historically lifted advisory and capital markets revenue by ~5-8% over the following 12 months for market leaders, while smaller regional players see much smaller gains.

AI-driven infrastructure spending creates a capital-intensity bifurcation in the server OEM and component supply chain. Companies that can secure GPU allocations and optimize bill-of-materials will see gross-margin expansion of 200–400bps if ASPs skew toward high-margin configurations; firms without secured supply or with single-sourced components face order-book volatility and step-function revenue risk if bottlenecks re-emerge over the next 3–9 months.

The consensus underprices two tail risks: a re-rating if macro risk premia rise (a 50–75bp sustained move higher in real rates materially reduces LBO activity inside 6–12 months) and a regulatory push against large deal closings that can abruptly re-price adviser multiples. Near-term headlines will move sentiment and create tradeable intraday spikes, but position sizing should be driven by a 3–12 month view anchored to financing conditions and supply-chain cadence.

Key Decisions for Investors

• Long GS equity (6–12 month horizon), size 1–2% NAV: expect 20–35% upside if advisory momentum sustains; pair with a 3-month 5–7% OTM put as a hedge to cap headline-driven drawdowns; stop-loss at -18% from entry.
• Long SMCI on pullback (3–9 months), buy on 20–25% pullback from recent highs, target 40–60% upside if GPU allocation holds; hedge execution risk by shorting a broad semiconductor ETF (SOXX) equal to 40% notional to isolate order-book strength; stop-loss at -22% or if GPU spot-price premium collapses by >30% within 30 days.
• Short APP (AppLovin) via 3–6 month puts or small outright short, size 0.75–1% NAV: thesis is CPM cyclicality and ad-budget risk can compress multiple by 20–30% if macro tightens; take profits at 25–35% down or cut if company reports sustained monetization beat.
• Event hedge: buy 3–6 month out-of-the-money insurance (index puts) sized to cover 3–5% NAV if geopolitical/regulatory headlines spike risk premia — cheap tail insurance commonly trades <1% premium for 3-month protection and materially improves asymmetric payoff for equity-leaning books.