Goldman Sachs has increased its year-end price target for the S&P 500 to 7600, citing sustained earnings growth driven by artificial intelligence investments as the primary catalyst for further gains in U.S. equities. The S&P 500 has rallied 12% since March 30, marking its strongest advance since April 2020, with a temporary improvement in the geopolitical outlook providing important context for the rebound. According to trading desk reports, Goldman Sachs portfolio strategist Ben Snider set the year-end target in an April 20 report, projecting an approximate 7% rise from current levels. He also forecast earnings per share growth of 12% in 2026 and 10% in 2027, with the price-to-earnings ratio stabilizing near its current level of around 21 times.
AI investment spending is a key driver behind upward revisions to profit expectations. Goldman Sachs estimates that AI will contribute roughly 40% of the S&P 500's EPS growth this year, with a handful of technology stocks dominating recent earnings estimate revisions. Consensus earnings expectations for 2026 and 2027 have been raised by 4% since late January, while stock repurchase authorizations year-to-date have reached a record $422 billion. Narrowing market breadth and ongoing geopolitical volatility remain near-term risks. The S&P 500's market breadth has narrowed to one of its lowest levels since the dot-com bubble. The impact of energy prices and supply chain disruptions on consumer demand and corporate profit margins will be a central focus during the ongoing Q1 earnings season.
Goldman Sachs' 7600 target assumes S&P 500 EPS will rise from $275 in 2025 to $309 in 2026—a 12% year-over-year increase—and further to $342 in 2027, representing 10% growth. The P/E multiple is expected to remain near 21 times. The firm noted that current market pricing largely reflects its economists' forecast of solid but below-trend GDP growth in coming quarters. Against this backdrop, macroeconomic growth-sensitive stocks offer limited appeal. Goldman Sachs recommends greater exposure to long-term growth companies that benefit from electric infrastructure investment and possess strong individual growth narratives. It also pointed out that recent compression in valuation premiums for many growth stocks further supports tilting toward long-term growth.
The S&P 500's 12% rally since March 30 represents its strongest performance since April 2020 and the second strongest since March 2009. Goldman Sachs observed that market experiences in 2009, 2020, and 2025 suggest equity markets often react to improving signals well before an "all-clear" is declared. Prediction markets support the rally narrative; according to Polymarket data, implied odds of the Iran conflict ending by June 30, 2026, have risen sharply since late March. The firm expects equity market volatility to remain closely linked to geopolitical developments in the short term.
Sentiment indicators have recovered more modestly than prices. Goldman Sachs' U.S. Equity Sentiment Indicator rose from -0.9 on March 27 to +0.8 currently, near mid-January levels but well below the +2.8 peak seen during historical exuberance phases. Institutional investors rebuilding positions have been the main driver of the rebound, though retail investor activity has also increased during the rally. The removal of certain frequent-trading restrictions and relaxed minimum equity requirements for some margin accounts may support continued retail participation.
Positive corporate action signals are particularly notable. U.S. stock buyback authorizations year-to-date reached $422 billion, a record for the period. Announced strategic M&A volume in the U.S. has more than doubled year-over-year, and Goldman Sachs' IPO Barometer remains above average. The firm believes concerns over mega-IPOs disrupting markets are overstated, citing limited public floats and historical precedent.
Approximately 15% of S&P 500 companies will report earnings this week, with 90% having reported by May 8. Consensus expects Q1 EPS to grow 12% year-over-year, the strongest pre-earnings season expectation since 2021. Goldman Sachs anticipates overall results will modestly exceed estimates, but the real focus is on profit outlooks for Q2 and beyond—especially the potential impact of energy prices and supply chain issues on consumer demand and corporate margins.
AI capital expenditure guidance from hyperscale cloud providers will be the most critical variable this earnings season. Last quarter, consensus 2026 capex expectations for major hyperscalers—including Amazon, Meta, Google, Microsoft, and Oracle—were raised by $130 billion to $670 billion, equivalent to over 90% of this year's expected cash flow. Driven by this trend, Goldman Sachs' AI data center stock basket has surged nearly 60% year-to-date. The firm views direct beneficiaries of AI infrastructure build-out as the clearest near-term opportunity within the AI investment theme. Software companies face persistent disruptive uncertainty, while hyperscalers need to demonstrate slowing capex growth alongside accelerating revenue growth to regain market momentum.
From a valuation perspective, the S&P 500's forward P/E of 21x is below the January 2026 peak of 22x and near its five-year average. Although this level remains in the 87th percentile over a 40-year history, Goldman Sachs believes it is close to fair value given near-record profitability and interest rates below long-term averages. It expects the P/E multiple to remain near current levels in coming months, with further market gains driven primarily by earnings growth.
Narrowing market breadth signals underlying structural fragility. The S&P 500's market breadth is among the narrowest since the dot-com era, consistent with earnings estimate revisions being highly concentrated in a few tech stocks. Dispersion of returns among individual stocks is also unusually high. Over the longer term, Goldman Sachs identifies the broad impact of AI on corporate profits and employment, as well as the path of inflation and Federal Reserve policy, as the most significant known unknowns.