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Stock Markets April 21, 2026 07:49 AM

Goldman Sees S&P 500 Extending Gains, Cites Earnings and AI Investment

Bank projects year-end S&P 500 target of 7,600, backed by EPS growth and AI-driven spending

By Maya Rios
Goldman Sees S&P 500 Extending Gains, Cites Earnings and AI Investment

Goldman Sachs forecasts further upside for the U.S. equity market, setting a year-end S&P 500 target of 7,600. The outlook assumes continued earnings growth - including 12% EPS expansion in 2026 and 10% in 2027 - and holds the index's price-to-earnings multiple near 21 times. The bank highlights AI spending as a major driver of earnings and recommends exposure to secular growth names and power infrastructure beneficiaries, while warning of narrow market breadth.

Key Points

  • Goldman Sachs sets a year-end S&P 500 target of 7,600, implying roughly 7% upside and assumes the index trades near 21 times earnings.
  • The forecast relies on consensus EPS growth of about 12% in 2026 and 10% in 2027, with AI investment estimated to drive roughly 40% of S&P 500 EPS growth this year.
  • The bank recommends tilting toward secular growth companies and names tied to power infrastructure investment, while noting narrow market breadth as a key vulnerability.

Goldman Sachs reiterated a bullish view on U.S. equities in a note on Monday, projecting the S&P 500 will keep rising and setting a year-end target of 7,600 - about 7% above current levels. The bank's scenario assumes the market's valuation remains around 21 times earnings while corporate profits continue to expand.

The bank's forecast embeds specific earnings trajectories: consensus estimates of 12% earnings per share growth in 2026 and 10% in 2027. Those EPS gains are central to Goldman's view that the market can reach fresh highs without requiring a higher price-to-earnings multiple.

"The US equity market should continue to make new highs in coming months on the back of continued earnings growth," Snider wrote.

Goldman noted the recent speed of the rally, observing the S&P 500 has climbed 12% since March 30 - the firm describes that as the sharpest advance since April 2020. The bank links this upswing to the pattern of historical recoveries and to an easing in geopolitical tensions, and says investor sentiment has bounced back to pre-war levels even though portfolio positioning has yet to return to prior peaks.

On the earnings front, Goldman says consensus EPS forecasts for 2026 and 2027 have increased about 4% since late January, a lift the bank attributes to spending on artificial intelligence. Goldman estimates AI-related investment will account for roughly 40% of S&P 500 EPS growth this year. The bank also flagged hyperscaler capital expenditure guidance as an important focus for the current earnings season.

Within equities, the note recommends a tilt toward secular growth companies that benefit from idiosyncratic earnings tailwinds and face limited risk of disruption from AI. Goldman specifically calls out firms connected to investment in power infrastructure as attractive targets for allocation.

However, the bank cautioned about market narrowness. It highlighted that breadth has compressed to one of the lowest levels since the Dot Com bubble, identifying that as a key vulnerability. Goldman also emphasized that "the beneficiaries of AI investment spending remain the clearest opportunity in the AI complex."

Implications for sectors

  • Technology and AI-exposed companies - positioned as major contributors to EPS growth.
  • Power and infrastructure-related firms - called out as attractive due to secular tailwinds.
  • Broad equity market - supported by projected earnings expansion and steady valuation.

Risks

  • Compressed market breadth - breadth has dropped to one of the narrowest levels since the Dot Com bubble, increasing the risk of concentrated downside; this primarily impacts the broad equity market and technology-heavy indices.
  • Earnings sensitivity - the outlook depends on projected EPS growth remaining on track; sectors reliant on AI spending and hyperscaler capex guidance could be particularly affected if estimates weaken.
  • Valuation rigidity - the projection assumes the S&P 500's price-to-earnings multiple stays near 21 times; a re-rating could alter the upside potential, affecting all equity sectors.

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