By Lawrence C. Strauss
Ben Snider, who became chief U.S. equity strategist at Goldman Sachs Group in December, has big shoes to fill -- two pairs, in fact. His predecessor, David Kostin, who spent 31 years at Goldman before retiring at the end of last year, was a Wall Street luminary, as was Kostin's predecessor, Abby Joseph Cohen, a longtime member of the Barron's Roundtable.
Snider, 41, is more than ready for his close-up. He has been a market strategist since joining Goldman in 2010, and is a sharp student of market dynamics, including the artificial-intelligence trade. "I want to see evidence that all of this AI investment is going to turn into AI revenue and earnings," he said in a recent interview with Barron's. "That, to me, is the biggest current question for U.S. equity investors."
Snider is facing a major test early in his tenure -- namely, the war in Iran, which has lifted oil prices and pressured stocks. Still, he remains bullish on U.S. equities, which the firm expects to rise in tandem with corporate earnings growth.
Barron's spoke with Snider on March 10 and again on March 16 about the outlook for earnings, interest rates, AI, and some of his favorite sectors. An edited version of these conversations follows.
Barron's: What are the most important things you learned from David Kostin?
Ben Snider: I have learned a tremendous amount from him. He has been a mentor and friend. Two things that he taught me really stand out among many, many lessons. The first is to use frameworks. That helps with our investment recommendations and our analyses, but it also helps when we discuss our views with clients. Anyone can say, "Buy this sector" or "The market will go up or down."
What is an example of a particularly useful framework?
When we forecast earnings, we rely on a structured set of models. When we study a sector, we have historically analyzed a set of drivers that we understand are key to that sector. When we think about valuations, we rely on data, relationships, and rules.
Another important lesson David taught me is to approach the markets as if I were an investor, as if I were a portfolio manager -- to really think, at the end of the day, about how we are going to help add value for our clients.
You had a bullish market view coming into the year. Are you still upbeat?
Our view at the start of the year was that earnings growth would be the key driver of equity returns, as is generally the case. We saw a combination of macro tailwinds, including monetary-policy easing and the fiscal package passed last year known as the One Big Beautiful Bill Act. There was also the AI investment boom. We were forecasting 12% earnings growth for the S&P 500 index this year, which translated into a 12% total return for the index in 2026.
These forecasts are still intact. We spend a lot of time talking about valuations and bubble risk, but if you look at the long-term trajectory of the S&P 500, almost all of its return has been driven by earnings. Even most of last year's return was driven by earnings.
Yet, the S&P 500 is down 3% year to date, and more since the Feb. 28 start of the war in Iran. Are investors ignoring that rosy earnings outlook?
Our economists have lowered their [2026 fourth-quarter] forecast for real growth in gross domestic product to 2.2% year over year from 2.5% at the start of the year, and we have raised our forecast for oil prices. All else being equal, that means lower earnings for the S&P 500. However, we have also seen a stronger boost to earnings from AI, in particular AI investment, than we had expected.
Our earnings forecast hasn't changed, but the other dynamic is that uncertainty is higher. That increases the downside risks, but it has also led to lower valuations. At the start of the year, the S&P 500 was trading for 22 times consensus estimates, one of the highest price/earnings multiples on record. Because the market has moved modestly lower in the past couple of months as earnings have continued to grow, the multiple today is just 20 times.
At 20 times earnings, the market isn't cheap. Does that concern you?
The market's forward P/E is elevated relative to its history. The only times it was higher in the past several decades were during the peak of the dot-com boom and immediately after the Covid recovery in 2020 and 2021.
However, based on our models, the multiple is reasonable relative to fair value. That's because interest rates are well below their historical average, and corporate profitability is close to the highest level on record. The fundamental drivers of valuation, including earnings-per-share growth, support an elevated multiple today.
What is the likelihood of multiple expansion?
It is hard to justify a substantial expansion in the valuation multiple. Equity investors should be looking for earnings to drive the market higher from here. Also, we see an unusually wide dispersion of multiples. In other words, the gap between the price/earnings multiples of the most expensive stocks and the least expensive stocks is much wider than average today. That is one reason why we considered value an attractive strategy coming into the year. And that hasn't changed.
AI investments and AI cloud services will account for 40% for the S&P 500's EPS growth this year, you note. That's up from 25% in 2025. What are the implications?
Based on current consensus estimates, the largest hyperscalers -- Amazon Web Services, for example -- are expected to spend about $670 billion on capex [capital expenditure] investment this year. That is about $500 billion, or four times more, than what they spent before the start of the AI boom. One company's capex investment is another company's revenue. That is helping to spur substantial earnings growth across the market.
Where are we in the AI cycle?
It still looks like we're in the early stages. AI capex investment not only continues to grow, but to surprise on the upside relative to consensus estimates. The market continues to focus on the earnings beneficiaries of those investments, largely concentrated in the semiconductor companies.
Meanwhile, if we look at corporate adoption, we are in very early days. In their fourth-quarter earnings comments, 70% of S&P 500 companies mentioned AI on their conference calls, but only 1% of companies actually quantified the earnings benefit they are receiving from using AI.
Which parts of the AI landscape look interesting now from an investment perspective?
The market has been clear for more than three years, ever since the launch of ChatGPT: Investors will refuse to look ahead and guess at the future, and instead will focus on visible near-term earnings. This is very different from what happened 25 years ago, when Cisco Systems traded for 130 times earnings.
If you look at companies like Nvidia or the other semiconductor firms, their share prices have generally been moving in close correlation to near-term earnings estimates. That tells me that as long as capex continues to grow at this rate, the best opportunity is going to remain in the infrastructure space. As we see more companies report the revenue they are generating from the use of AI -- or the earnings they are receiving from productivity benefits -- the AI trade will expand, but it is very early in that process.
What concerns are you hearing about from your clients?
Recently, the No. 1 topic has been uncertainty about conflict in the Middle East, and how much that will affect underlying earnings and economic activity. The bigger topic that I expect will continue, even after that conflict is resolved, is the trajectory of AI. That is true regarding both the trajectory of investment spending and corporate adoption and the eventual productivity benefits.
My concern is similar to the market's. I want to see evidence that all of this AI investment is going to turn into AI revenue and earnings. That, to me, is the biggest current question for U.S. equity investors.
What other industry sectors look attractive to you?
At the start of this year, we highlighted two sectors that were trading a discount relative to both the market and their own histories. They were consumer staples, which has performed well this year, and healthcare, which has been mixed, although large-cap pharma has done well. We are still overweight healthcare.
You have written that solar energy and cybersecurity are two areas worth considering. What is their appeal?
Since we expect the market to be driven higher by earnings growth, a key investment theme is finding sectors or companies with above-average earnings growth. In addition, the uncertainty surrounding the economic impact of the continuing conflict [in the Middle East] makes an a-cyclical earnings growth outlook even more important. We expect solar energy and cybersecurity companies to have strong secular earnings-growth tailwinds .
How are those sectors protected against potentially higher oil prices and concerns about AI?
Our expectation with solar energy was that AI demand would already be driving power prices higher over the next couple of years. The move higher in oil prices just compounds that tailwind for the solar-energy space. On cybersecurity, we have seen a widespread decline in software stocks. This is one pocket of the software industry that will be differentiated in its resilience and earnings growth.
How much would additional easing by the Federal Reserve help stocks?
Our economists are expecting two 25 basis-point rate cuts in the second half of this year. [A basis point is a hundredth of a percentage point.] One reason why we consider current multiples reasonable is the expectation of continued friendly monetary policy. At the end of the day, though, the health of corporate earnings and the economy is much more important for equities than the trajectory of rates. If it turns out that the economy is healthier than we expect -- and, therefore, the Fed eases less -- that will be a net positive for the equity market.
Thanks, Ben.
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March 19, 2026 03:00 ET (07:00 GMT)
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