AI Investment Growth Fades as S&P 500 Hits New Forecasted High

Goldman Sachs forecasts the S&P 500 will reach 8,700 in the next 12 months, driven by profit growth rather than a higher valuation.

The investment bank's strategists expect investors to remain uncertain about AI's long-term impact on profits, making a dramatic increase in valuations unlikely.

S&P 500 earnings per share (EPS) grew 51% in the second quarter year over year and 26% during the past four quarters.

The largest US hyperscaler companies are set to spend $800 billion on capital expenditures this year, an increase of 94% from 2025. This spending is flowing through the earnings of chipmakers, tech hardware suppliers, industrial firms, and utilities.