Goldman Sachs' top equity strategist isn't expecting a second-quarter earnings season that matches the fireworks of the first quarter, but he's still forecasting impressive profit growth tied to the theme that has gripped the current bull market for almost four years now: AI.

Ben Snider thinks the artificial-intelligence investment wave, which has defined the market's advance since the November 2022 launch of OpenAI's ChatGPT, will be the second-quarter earnings story again this year.

So much so, in fact, that only two stocks -- Nvidia and Micron Technology -- will comprise about 40% of the S&P 500's projected earnings growth, with the broader AI infrastructure complex contributing nearly two- thirds of the 22% advance he projects for the benchmark's overall earnings tally.

That figure, the highest entry point in five years, follows a 27% gain over the first quarter that topped early Wall Street forecasts by as much as 15 percentage points.

Snider doesn't see a repeat of that broader outperformance -- the best since 2021 -- but does sees the median S&P 500 stock post earnings growth of around 9%, down from 13% over the first three months of the year.

And this season's figures take on an added level of importance given that earnings growth, and not multiple expansion, has accounted for all of the S&P 500's nearly 20% gains over the past year.

"We expect Q2 reports will reveal another quarter of strong earnings growth, supported by a solid macro backdrop and the ongoing AI investment boom," Snider wrote in a note on Monday.

"AI infrastructure stocks are expected to contribute nearly 60% of S&P 500 EPS growth this quarter," he added. "The top 10 contributing stocks are expected to account for nearly 75% of aggregate S&P 500 earnings growth."

That gap, which suggests only a minimal contribution from the vast majority of S&P 500 stocks and the market's eight sectors outside of information technology, communications services, and consumer discretionary, sits in contrast to the rotation away from tech and AI stocks and into those more closely connected to the broader economy.

Healthcare stocks have powered nearly 8% higher over the past month, leading sector gains during the pullback in tech stocks. Industrial, financial, utilities and consumer staples have all posted broader gains, while sectors tied to the AI trade have underperformed notably since the S&P 500 peaked on June 2.

That said, AI spending remains a major theme heading into the earnings season, as well as for the back half of the year and beyond, but for notably different reasons.

On the front end, Snider isn't expecting any big changes in AI capex forecasts, which sit near the $720 billion mark for this year alone for the market's biggest hyperscalers.

"Our equity analysts believe that 2026 capex budgets are mostly set while 2027 budgets are in early planning stages," he said, adding that Microsoft is an outlier in this assessment given that its fiscal year ended in June.

"The Q1 earnings season signaled incremental evidence of the hyperscalers' ability to monetize AI," Snider said, but noted that "weak free cash flows, increased equity and debt issuance, and uncertainty regarding the eventual market share of the frontier models have weighed heavily on the hyperscalers during the past several weeks."

An index of the Magnificent Seven, in fact, has fallen around 10.4% since the end of last month, with virtually every stock in the cohort, outside of Apple, now marked in correction territory.

However, investors are likely to start assessing the AI spending plans of those outside of the hyperscaler and chip sector complex, perhaps establishing the first reads on both adoption of the new technology and its likely impact on profits and margins beyond the tech sector.

"As enterprise AI adoption continues to progress, investors are trying to assess how much companies will spend on AI, where in the AI ecosystem that spending will be concentrated, and whether that spending will generate a sufficient return," Snider said.

"We expect corporate commentary on these issues will be a major topic of investor scrutiny this season," he added.

Write to Martin Baccardax at martin.baccardax@barrons.com

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June 29, 2026 12:16 ET (16:16 GMT)

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