The S&P 500 climbed toward new highs in 2026 while its valuation multiple fell, a combination that points to profits driving the rally.
That dynamic means earnings are doing the heavy lifting for an index that could have stalled once the Federal Reserve paused rate cuts.
Goldman Sachs backed that shift with numbers, raising its 2026 earnings-per-share (EPS) forecast for the S&P 500 to $340 and projecting 24% annual profit growth.
That upgraded estimate anchors a year-end index target of 8,000, up from the bank’s earlier call of 7,600.
Ben Snider, Goldman’s chief U.S. equity strategist, delivered a companion figure that complicates the outlook as much as it validates it.
Artificial intelligence (AI) infrastructure spending is driving roughly half of all S&P 500 earnings growth in 2026, Goldman Sachs Research confirmed.
Half of S&P 500 earnings growth flows through one AI capital spending cycle
Snider’s estimate traces back to a spending wave that has outpaced Wall Street forecasts for three consecutive years. Hyperscale technology companies are expected to pour $754 billion into capital expenditure in 2026, an 83% jump from 2025, Goldman Sachs Research confirmed.
Analyst consensus estimates project hyperscaler spending will reach $905 billion in 2027, though Goldman Sachs has said that figure is too conservative. Semiconductor companies are the primary direct beneficiaries of the spending, Goldman Sachs Research noted.
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Aggregate S&P 500 earnings grew 18% year over year in the first quarter, and the median company posted its strongest quarterly growth rate in a decade outside the 2018 tax-cut surge and the post-pandemic reopening, Goldman noted.
Capital spending is discretionary, and a pullback by two or three major hyperscalers would thin out the profit growth powering the index.
NVIDIA’s 2nd quarter shows how concentrated the AI earnings base is
NVIDIA sits at the center of the cycle Goldman Sachs identified, and its latest results illustrate how deep that dependency runs.
The chipmaker reported $96.2 billion in revenue for its second quarter of fiscal 2027, a 106% increase from a year earlier, its Securities and Exchange Commission (SEC) filing showed.
Data center revenue accounted for $89.0 billion of that total, up 117% year over year, meaning more than 92% of NVIDIA’s quarterly sales came from selling compute infrastructure.
Those sales flow directly to the same hyperscale buyers whose spending Snider’s half-of-earnings estimate depends on.
Jensen Huang, NVIDIA’s founder and chief executive officer, argued that compute capacity has become a revenue-generating asset in its own right rather than a back-office cost.
<strong>AI has reached its inflection point. It’s doing useful work. Its tokens are productive and profitable. Now, compute is revenue</strong>.
NVIDIA guided third-quarter revenue to $108 billion, implying continued sequential acceleration, the SEC filing confirmed.
That outlook reflects commitments already locked in by buyers who have announced full-year capital budgets running into hundreds of billions each.
NVIDIA’s latest results show how heavily AI earnings depend on hyperscaler spending, with data centers driving more than 92% of quarterly revenue.NurPhoto / Getty Images
Goldman’s positioning indicator hits 2026 low as seasonal risks build
Goldman’s proprietary positioning indicator, which tracks hedge funds, mutual funds, and other institutional investors, has dropped to its lowest reading since March 2026, Snider confirmed on CNBC’s Squawk on the Street.
Light positioning cushions a selloff because less crowded exposure leaves less to unwind during a downturn. The same analysis flagged seasonal weakness in September 2026, amplified by midterm-year patterns, and a Volatility Index that has drifted above 16.
Snider noted that enterprise adoption of AI tools is broadening beyond raw infrastructure into productivity and enterprise applications.
Goldman’s forecasts embed a 0.4 percentage point AI productivity boost to S&P 500 earnings this year, rising to 1.5 percentage points in 2027, Goldman Sachs research confirmed.
Most S&P 500 companies still exclude AI-driven earnings gains from their reported figures, the bank noted.
Until that broadening moves from management commentary into bottom-line results, the concentration risk behind Snider’s estimate remains the defining feature of this earnings cycle.
Goldman’s S&P 500 bull case rests on one spending cycle
The earnings growth behind Goldman Sachs’ index forecast is real, but its durability hinges on a narrow set of quarterly decisions rather than broad economic momentum, Snider’s analysis indicated.
Hyperscaler budget updates each quarter carry outsized weight for the index because the companies setting those budgets are generating some part of the index’s total earnings expansion, Goldman Sachs Research noted.
For investors holding broad S&P 500 exposure through index funds or retirement accounts, quarterly capital expenditure guidance from Microsoft, Alphabet, Amazon, and Meta deserves close attention as a leading indicator for index-level earnings, Snider’s framework indicated.
The next round of those updates arrives with third-quarter results and fiscal 2027 spending plans from each company.
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