US Stock Market: JP Morgan raises S&P 500 year-end target to 8,000 on AI, earnings optimism

J.P. Morgan raised its year-end target for the S&P 500 index to 8,000 from 7,800 on Monday, citing expectations of solid corporate earnings and growing confidence that artificial intelligence investments by large technology companies will translate into faster revenue growth, Reuters reported.

The new target represents about 3.1% upside from the S&P 500's latest close of 7,757.64 and adds to a growing number of bullish forecasts. At least seven brokerages now expect the benchmark index to reach 8,000 by the end of 2026.

J.P. Morgan also raised its earnings-per-share forecast for S&P 500 companies to $365 for 2026 from $350 previously, while its 2027 estimate was increased to $420 from $390.


According to Reuters, the brokerage said rising AI investments were becoming more clearly reflected in second-quarter results, particularly at Google, Amazon and Microsoft. Strong cloud growth, expanding order backlogs and improved visibility into cash flows have helped ease concerns among investors over the returns generated by heavy AI spending.

The brokerage expects elevated backlogs to convert into recognized revenue, supporting continued cloud growth and strengthening the case for increased AI capital expenditure. It also sees improving order coverage as helping to address concerns over returns on invested capital.

The upbeat outlook comes as corporate earnings continue to exceed expectations. Of the 436 S&P 500 companies that had reported their June-quarter results through Friday morning, 85.1% had beaten analyst estimates, according to LSEG data. That compares with a long-term average of 68% since 1994.

Despite raising its index target, J.P. Morgan kept its forward valuation multiple assumption at around 20 times. The brokerage cited higher interest rates, geopolitical risks and a large pipeline of equity and debt issuance as factors that could constrain further expansion in valuations.

The S&P 500 has gained 13.3% so far this year, supported by optimism around AI and resilient corporate earnings.

However, markets remain sensitive to geopolitical developments, with uncertainty surrounding the reopening of the Strait of Hormuz and diplomatic talks involving Iran, Oman and the United States continuing to weigh on oil prices and global shipping conditions, Reuters reported.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)