Goldman Sachs has raised its S&P 500 year-end forecast for 2026 to 8,000 from 7,600, representing a 6.4% increase from the index's last close of 7,519.12. According to reports from Goldman Sachs, this revision is driven by an exceptionally strong first-quarter earnings season and upgraded profit forecasts. As per Goldman analyst Ben Snider, continued earnings growth should drive a further 6% rise in the index from current levels. The Wall Street benchmark has hit fresh record highs after record after record in 2026, despite ongoing geopolitical tensions between the United States and Iran. The revised target implies a potential upside of about 6.4%, highlighting the brokerage's growing confidence in the strength of the U.S. corporate sector despite concerns around inflation, geopolitical tensions, and slowing consumer demand. The move adds to a growing wave of bullish calls from brokerages, with UBS Global Wealth Management the latest to lift its outlook last week, citing robust AI-driven earnings that could help offset inflationary pressures and supply risks from the Iran conflict.
The brokerage has raised its S&P 500 earnings-per-share forecasts to $340 for 2026, indicating a 24% year-on-year jump, and to $385 for 2027, representing an additional 13% increase. As reported by Goldman Sachs, earnings growth has powered the entire S&P 500 return so far this year and the brokerage expects this dynamic to continue in the coming months. According to Reuters, Goldman Sachs believes earnings growth has been the primary force behind the market's rally this year and expects the trend to continue in the months ahead. The firm believes beneficiaries of AI infrastructure investment will account for roughly half of S&P 500 earnings per share growth this year. Goldman analysts noted that while earnings have remained robust across the board, semiconductor companies at the heart of the AI infrastructure complex have recently outpaced their forward earnings. The strong earnings growth continues to support the upward revision in Goldman's forecasts, with the brokerage stating that while S&P 500 earnings estimates have risen more quickly than index price appreciation, the semiconductor stocks at the heart of the AI infrastructure complex have recently outpaced their forward earnings. Goldman analysts observed that earnings estimates for the broader index rising faster than stock prices in recent months, while semiconductor companies central to the AI boom have continued to outperform even their improving earnings outlooks.
Despite the positive earnings outlook, Goldman Sachs warned that valuation expansion is unlikely to be a meaningful driver from current levels. The firm noted that the S&P 500's forward price-to-earnings multiple has already declined 4% year-to-date even as the index has risen 10%. Goldman stated that its forecasts incorporate a multiple that 'remains close to the current 21x'. The brokerage emphasized that while S&P 500 earnings estimates have risen more quickly than index price appreciation, the semiconductor stocks at the heart of the AI infrastructure complex have recently outpaced their forward earnings, supporting the upward revision in their forecasts. While weak consumer spending and elevated costs pose risks, Goldman analysts believe that strong AI investments would offset these pressures. The latest forecast underscores how deeply AI enthusiasm has become embedded in Wall Street's expectations for future corporate growth and market performance.
Goldman Sachs flagged several key risks that could impact the market outlook. The firm warned that the oil shock threatens to create conditions of 'disappointing growth and tightening financial conditions that have marked the ends of previous bull markets'. Additionally, the earnings-driven outperformance of AI infrastructure stocks raises their hurdle going forward. Despite these concerns, Goldman analyst Ben Snider stated that stocks with the strongest earnings revisions have generally outperformed year-to-date, flagging hyperscalers and power infrastructure plays as attractive opportunities within the AI buildout theme. The firm noted that the strength of the recent momentum-driven rally and midterm election seasonality argues for moderating returns in the coming months. Goldman expects companies tied to AI infrastructure development, particularly semiconductor and technology firms, to remain key contributors to earnings growth, with the brokerage noting that AI-related beneficiaries could account for nearly half of the S&P 500's earnings expansion this year.
