Strategists at Goldman Sachs predict that the widespread adoption of artificial intelligence (AI) and resilient US economic growth will propel corporate earnings to double-digit growth next year, pushing US markets to new highs.
Led by Ben Snider, the Goldman Sachs team stated in a recent report that earnings per share (EPS) for S&P 500 companies are expected to surge 12% next year, followed by another 10% increase by 2027. Based on improved earnings projections, the firm reaffirmed its year-end target for the S&P 500 at around 7600, implying roughly 10% upside from current levels.
This bullish outlook aligns with forecasts from several major Wall Street institutions. Analysts at Morgan Stanley, Deutsche Bank AG, and RBC Capital Markets LLC also anticipate US equities will deliver over 10% gains by 2026. While concerns linger about potential AI-driven valuation bubbles due to massive capital expenditures, investor confidence in the economic outlook continues to drive major indices to record highs.
Ben Snider, set to succeed David Kostin as Goldman Sachs' chief US equity strategist by year-end, emphasized that large-cap tech firms will remain market leaders. He noted that easing tariff pressures and healthy revenue growth will further support strong market performance.
**AI Productivity Gains Begin to Materialize** Goldman Sachs' predictive models indicate that AI-driven productivity improvements are gradually translating into corporate profits. Of the projected 12% EPS growth next year, AI is expected to contribute approximately 0.4 percentage points, with its contribution expanding to 1.5 percentage points in the 10% growth forecast for 2027.
Ben Snider noted in the report that while AI adoption remains in its early stages, large companies have demonstrated significantly faster progress compared to smaller firms. He expects robust market fundamentals, supported by steady baseline revenue growth, diminishing tariff headwinds, and sustained profitability among index heavyweights.
Although market breadth has improved, the tech sector will remain the primary driver of earnings growth next year. Goldman Sachs projects that the S&P 500's largest companies—including Nvidia, Apple, Microsoft, Google, Amazon, Broadcom, and Meta—will account for about 46% of the index's profit growth in 2026, only slightly below this year's contribution.
Separately, Bloomberg Intelligence-tracked analyst estimates suggest that S&P 500 companies' net income could rise 14% in 2026, driven by an 18% surge in the "Magnificent Seven's" earnings.
This bullish sentiment is widespread among asset managers. An informal Bloomberg survey found global fund managers are betting the rally will persist, with optimism largely rooted in economic resilience.
However, risks remain. Some market participants remain cautious about tech giants' heavy AI infrastructure spending, fearing potential valuation bubbles. Despite this, major institutions maintain a risk-on stance, betting that corporate earnings growth will justify elevated valuations.
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