According to Rich Privorotsky, head of Goldman Sachs' One-Delta trading desk, the market is on the verge of a fresh breakout for both the S&P 500 and the Nasdaq, fueled by the deep productivity transformation driven by AI agents.

In his latest report, Privorotsky notes that despite unfavorable seasonal factors, still-elevated real interest rates, and lingering geopolitical tail risks, the current caution in market sentiment and positioning itself represents significant upside potential.

He remarks: "These types of rallies tend to see underwhelming participation because everyone is busy in September explaining why it won't work."

In his view, the truly critical variable to watch is the accelerating adoption of Agentic AI. He argues this trend will "fundamentally reduce friction between people, technology, and capital," producing a structural disinflationary macro effect, with equities being the most direct vehicle to capture this transformation.

Market headwinds are fully priced in, with low positioning creating upside potential

Privorotsky opens with the "Wall of Worry" framework, systematically cataloging the factors currently weighing on market sentiment—the sharp narrative shift around AI, broadly cautious positioning and sentiment, midterm elections, and the triple disturbance from oil prices and interest rates—and concludes that all these risks have been fully priced in, or even excessively digested by the market.

He acknowledges that the market is currently in the most unfavorable two-week window on a seasonal basis, with real interest rates still high and geopolitical risks objectively present.

However, in his analytical framework, these factors are precisely the source of the market's "low positioning and low participation," rather than decisive obstacles blocking the rally.

AI agents: eliminating friction and unlocking the productivity dividend

Privorotsky centers his argument on the "Inference Economy" and the large-scale adoption of AI agents.

He uses Muse as a case study, pointing out that this is not the end point but the starting point for a wave of similar products entering the market, with implications that will profoundly reshape how individuals and enterprises operate, as well as the underlying logic of communication and transactions.

He notes that AI power users have previously possessed similar capabilities, but the technical barriers and maintenance costs were high, making them difficult for ordinary users to adopt out of the box. As large enterprises take on the underlying responsibilities of security, infrastructure, and distribution, this situation is changing, and "a great deal of friction and rent extraction will disappear from the economy."

In his view, this in itself represents a productivity leap—capital is being reallocated toward more efficient directions, and the "inefficient friction" hindering economic growth is dissipating. His overall assessment of this trend is that its impact on the broader equity market is positive and carries a structural disinflationary attribute.

The CPU supply chain is the most direct beneficiary, but the dividend diffusion trend has already emerged

Privorotsky points out that the most intense manifestation of the inference economy is currently concentrated in the CPU supply chain, but he expects the market's assessment to eventually become broader rather than more focused.

He believes the traditional AI capital expenditure supply chain also holds allocation value, though with relatively lower beta, while the productivity dividend will diffuse across a wider range of industries.

He specifically highlights the performance of TSMC—whose stock price is at elevated levels and poised for a breakout—and views it as a signal from the "mothership" of global hardware. Meanwhile, he observes a notable divergence worth attention: the financial sector has weakened significantly while tech stocks strengthen, with second-order effects beginning to emerge.

In summary, Privorotsky's conclusion is that the agent revolution has arrived, the market is beginning to price in a major structural shift, and the strong buying in technology and semiconductor stocks is a direct reflection of this expectation.