Key Takeaways:
Goldman Sachs boosted its year-end 2026 forecast for the S&P 500 to 7,600, arguing that a boom in artificial intelligence investment will fuel double-digit earnings growth and push the market to new records.
"AI investment will contribute approximately 40% of S&P 500 EPS growth this year," Ben Snider, a strategist at Goldman Sachs, wrote in a note on April 20.
The new target from Goldman Sachs implies an upside of approximately 7% from the index's current levels. The firm's previous target was not disclosed.
The revision comes as the S&P 500 has rallied 12% since late March, its strongest advance since 2020. Goldman's forecast assumes the index's price-to-earnings multiple holds near 21 times, meaning gains will be driven entirely by profit growth, which it projects will grow 12% in 2026 and another 10% in 2027.
The bullish call is rooted in the ongoing capital expenditure boom in artificial intelligence. Snider noted that consensus earnings-per-share estimates for the S&P 500 have been revised 4% higher since January, with information technology and energy stocks accounting for nearly all of the increase. This has been supported by record corporate stock buyback authorizations, which have reached $422 billion year-to-date.
The view from Goldman Sachs aligns with other major Wall Street firms. J.P. Morgan recently lifted its own S&P 500 target to 7,600, also citing "a strong momentum in AI and tech stocks." The firm specifically mentioned the emergence of new models like Anthropic's 'Mythos' as a factor reigniting bullish sentiment in the AI trade.
However, Snider also pointed to risks. The market's breadth has narrowed to levels not seen since the dot-com era, with a small number of technology mega-caps driving a majority of the gains. This concentration, combined with ongoing geopolitical uncertainty and potential energy price volatility, remains a key focus for investors heading into the Q1 earnings season.
The upgraded forecast reinforces the market's reliance on a handful of technology giants for growth. Investors will be closely watching the upcoming Q1 earnings reports from major tech firms for any changes to their AI capital expenditure plans.
This article is for informational purposes only and does not constitute investment advice.
