The enthusiasm for artificial intelligence continues to impact Wall Street significantly, particularly with analysts revising their forecasts for the S&P 500. Three major financial analysts have raised their year-end targets, attributing the growth to investments in generative AI.
Julian Emanuel of Evercore ISI has the highest forecast, setting the S&P 500 target at 6,000, while Goldman Sachs and Citi also increased their targets to 5,600, citing the rising earnings expectations for tech giants such as Alphabet, Microsoft, Amazon, Meta, and Nvidia as key drivers.
Goldman Sachs highlighted that their previous underestimation of the tech sector’s impact on the market led to an adjustment of their forecast. Ben Snider from Goldman Sachs mentioned that the remarkable performance of these few stocks has significantly lifted the overall market, prompting a revision of their year-end target.
Similarly, Scott Chronert of Citi pointed out that the exceptional performance of large-cap tech stocks has been a substantial growth driver for the S&P 500, further reinforcing the upward adjustments in their predictions.
The “Magnificent Seven” stocks, including Tesla, Apple, Alphabet, Microsoft, Amazon, Meta, and Nvidia, have been instrumental in the S&P 500’s gains, accounting for more than two-thirds of the nearly 15% rise this year.
If these stocks continue to outperform, Goldman’s model suggests the S&P 500 could reach 6,300 by year-end. Barclays’ Venu Krishna also acknowledged the potential for tech stocks to push the S&P 500 higher, though his current target remains at 5,300, with a possibility of surpassing 6,000 in a bullish scenario.
Despite the concentrated nature of the market rally, strategists believe this should not deter investors. The strong performance of a few large-cap tech companies is seen as a feature of the S&P 500, capable of lifting the entire index.
Snider from Goldman Sachs emphasized that the index’s structure allows a few outperforming companies to drive substantial market gains, which is currently being observed.
However, there are concerns about high valuations driven by AI enthusiasm. JPMorgan’s Marko Kolanovic, maintaining a bearish target of 4,200 for the S&P 500, cautioned that current equity valuations are rich and sentiment is high.
Julian Emanuel from Evercore ISI also noted the S&P 500 is trading at historically expensive levels, but highlighted that stocks could remain at high valuations for an extended period, as evidenced by past market behavior. This suggests that despite high valuations, the market could still see further returns.
