New Delhi, May 17 -- The trajectory of both momentum and the broader S&P 500 would be dictated by the macroeconomic backdrop and the outlook for AI investment, Goldman Sachs said in a research report released this week.

The brokerage warned that while the momentum could extend for another month, sharp rallies near market highs had historically led to below-average returns in the following months. It added that a downturn in AI capex or a spike in equity and bond volatility could trigger a "catch down" reversal, while an improved macro outlook might instead spark a catch-up rally in laggards.

Goldman Sachs noted that the strength of the AI trade had lifted the S&P 500 to 14 new highs in the past month, even as market breadth narrowed and...