Wall Street’s new favorite word: earnings
Goldman Sachs took a bigger bite out of the S&P 500 apple, lifting its year-end target from 7,600 to 8,000. That’s not exactly “party at the top” territory, but it does signal the bank thinks the market still has room to run — thanks less to flashy multiples and more to old-fashioned profit growth.
The firm’s pitch is basically this: AI isn’t just a buzzword investors toss around at dinner parties anymore. It’s turning into a real earnings engine. Goldman now expects S&P 500 EPS to hit $340 in 2026 and $385 in 2027, with companies tied to AI infrastructure expected to account for roughly half of total index earnings growth over the next two years.
The AI trade is doing the math
Semis are still the cool kids in the room. Goldman said Nvidia and Micron alone could drive about a third of S&P 500 EPS growth this year, which is a reminder that the AI boom has gone from speculative story to actual spreadsheet material. The bank also flagged hyperscalers like Amazon, Alphabet, Meta, and Microsoft as attractive — basically the cloud giants that keep feeding the AI beast.
That said, the market isn’t just trading on pure optimism. Goldman’s view is that earnings revisions are doing the real work here, and that’s why the bank moved into the upper tier of Wall Street targets instead of hanging out with the skeptics.
The catch: oil is lurking in the wings
There’s one plot twist, because there’s always a plot twist. Goldman said a disruption in the Strait of Hormuz and higher oil prices could squeeze consumer spending, inflate costs, and slow the Fed’s ability to cut rates. Translation: AI may be the hero, but energy prices are still the villain in the sequel.
Big picture: Goldman is basically saying the bull market doesn’t need more hype — it needs profits. And right now, AI is paying the bills.