While many on the Street expect deceleration in the high-flying tech space after a strong 2017, Goldman Sachs analysts are advising clients to ignore warnings of an equity bubble, especially in the internet space. In a research note to clients, Goldman advised that "upward estimate revisions and related multiple expansion will drive continued outperformance in Internet.” (See also: RBC Picks Its 'Top Surprises for 2018.')

"With e-commerce growth accelerating, advertising dollars continuing to shift online and valuations near 5-year historic averages, despite recent outperformance, we expect upward estimate revision and related multiple expansion will drive continued outperformance in the internet," wrote the analysts. The investment bank pointed to a 15% year-over-year (YOY) surge in e-commerce in the fourth quarter as good news for many online commerce companies.  

Regulation and Other Risks Remain

Goldman highlighted large-cap plays such as Amazon.com Inc. (AMZN), Google parent Alphabet Inc. (GOOGL), PayPal Holdings Inc. (PYPL), Netflix Inc. (NFLX) and Facebook Inc. (FB), as particularly attractive on a risk-reward basis given their disproportionate share gains. "Idiosyncratic opportunities" remain in small- and mid-cap names, wrote the analysts, recommending shares of GrubHub Inc. (GRUB), Pandora Media Inc. (P) Twitter Inc. (TWTR) and Zillow Group Inc. (ZG) at buy

Despite maintaining an upbeat view on the tech sector in general, the analysts noted that risks such as regulation surrounding data, privacy and competition—as well as antitrust issues—could impede companies' ability to grow. 

While the current government shutdown may prove to be a short-term headwind to gross domestic product (GDP), Goldman sees any damage to be quickly reversed in the second quarter. "Markets have also tended to react mildly to shutdowns," wrote the analysts, although adding that when they are tied to the debt limit, the market could have a stronger negative reaction. (See also: A 10% to 15% Correction Is Unavoidable: Blackstone.)