Overview
Goldman Sachs raised its year-end target for the S&P 500 to 8,000 from 7,600 in a note released on Wednesday, pointing to an exceptionally strong first-quarter earnings season and upward revisions to profit forecasts. The bank said that the improved earnings trajectory should underpin further gains in the index even as it cautioned that the road ahead may be uneven.
Earnings and forecasts
In its update, Goldman increased its S&P 500 earnings-per-share forecasts to $340 for 2026 - a figure the firm says represents 24% year-on-year growth - and to $385 for 2027, which it characterizes as 13% growth. Goldman analyst Ben Snider noted that continued earnings expansion is expected to support about a 6% rise in the index from current levels.
Role of AI infrastructure
The bank highlighted that firms benefiting from AI infrastructure spending will account for roughly half of the S&P 500's EPS growth this year. Within that theme, Goldman pointed to hyperscalers and power infrastructure-related companies as areas where earnings revisions have been strongest and where opportunities have emerged during the buildout.
Valuation and multiples
Despite the constructive earnings outlook, Goldman said further valuation expansion is unlikely to be a meaningful driver of returns. The firm's note observed that the S&P 500's forward price-to-earnings multiple has already fallen about 4% year-to-date even as the index has risen roughly 10%. Goldman said its projections assume a multiple that remains close to the current 21x level.
Tactical view and market positioning
Goldman advised a cautious tactical stance. The bank argued that the recent momentum-driven rally combined with midterm election seasonality supports an expectation of more moderate returns over the coming months. Within the earnings-driven rally year-to-date, stocks with the strongest earnings revisions have generally outperformed, and Goldman identified hyperscalers and power infrastructure plays as particularly attractive within the AI buildout theme.
Risks flagged by Goldman
Snider highlighted several risks to the upbeat earnings-based outlook. He warned that an oil shock could create conditions of disappointing growth and tighter financial conditions - conditions that have marked ends of prior bull markets. He also cautioned that the earnings-driven outperformance of AI infrastructure names raises the bar for their future returns, increasing their performance hurdle going forward.
Note: The firm's projections and tactical recommendations reflect its current views as described in the Wednesday note, and the bank emphasizes potential near-term volatility despite a favorable earnings backdrop.