The AI investment boom is beginning to spread into the broader economy - a fact that is being reflected in analysts' earnings forecasts

Wells Fargo strategists have spotted a potential opportunity for investors.

The S&P 500's earnings story is getting stronger and broader, and that's good news for the stock market - particularly for shares of industrial, financial and technology firms, says Wells Fargo Securities.

Now that 80% of the companies in the S&P 500 SPX have reported their earnings, it is safe to say that this earnings season is on track to be a blowout. In aggregate, S&P 500 companies are beating Wall Street's EPS estimates by an average of 8% and are on track to see that metric rise by roughly 30% from the same period a year ago. That would be the fastest pace since the fourth quarter of 2021, according to Wells Fargo.

Perhaps even more notably: Non-tech companies are leading tech with a higher margin of earnings outperformance relative to expectations. Non-tech companies have topped estimates by about 10%, more than double the 4% beat rate from the group of megacap names known as the Magnificent Seven plus members of the tech sector.

SOURCE: WELLS FARGO SECURITIES, FACTSET

The strong quarter so far has pushed Wall Street to raise its outlook for the remainder of 2026 and beyond. Second-half 2026 earnings estimates for the S&P 500 have risen 0.8% since July 1, compared with the typical 1.2% decrease analysts usually make at this point of the earnings season.

Estimates for 2027 have also risen 1.6% so far this quarter, said the Wells Fargo team led by chief equity strategist Ohsung Kwon.

"2027 EPS is seeing the strongest revision trend in history. Guidance also came in strong, with 54% of EPS guidance topping consensus, near historic highs," Kwon and his team said.

A growing gap between performance and earnings expectations could present an opportunity for investors, Kwon said. Despite the earnings momentum, stock returns in technology XX:SP500.45, industrials XX:SP500.20 and financials XX:SP500.40 haven't kept pace with the upwards earnings revisions this quarter.

"Our overweight sectors, Tech, Industrials, Financials, have seen diverging fundamentals & performance trends this quarter, which we see as attractive buying opportunities," the Wells Fargo team wrote in a Sunday client note.

SOURCE: WELLS FARGO SECURITIES, FACTSET

In addition to earning more, non-tech companies are also starting to see a pickup in spending on capital expenditures - major projects intended to grow their businesses. Recently, capital expenditures in the U.S. have been dominated by AI-related spending.

But that is beginning to change, Wells Fargo said. And that could stimulate more activity for companies involved in building and financing these projects, which will eventually trickle down to the broader economy, the Wells Fargo team said.

"Data suggests counties with mega data centers in operation saw significant economic benefits. Since 2024, they saw 50% increase in new housing units built, 14% increase in home values, and 3.7% increase in number of people employed," the strategists added.

Stocks were lower on Monday afternoon as oil prices rose sharply (CL.1) (BRN00) amid doubts that the U.S. and Iran could soon reach a deal to reopen the Strait of Hormuz. The S&P 500 was falling 0.1%, while the Dow Jones Industrial Average DJIA was off 0.3% and the Nasdaq composite COMP was dropping 0.4%, according to FactSet data.

-Isabel Wang