Goldman Sees S&P 500 Earnings Growth Cooling Amid Artificial Intelligence Surge
The S&P 500 earnings growth has reached an unsustainable level, according to Goldman Sachs Group. The company expects this rapid rise to cool down rather than reverse. In the second quarter, the index's earnings per share increased by 51% year over year, and over the past four quarters, the growth reached 26%. This pace has pushed profits above their longer-term trend.
Goldman Sachs attributes the current earnings boost to several temporary factors. Artificial intelligence spending is a major contributor, with Amazon AMZN, Meta Platforms META, Microsoft MSFT, and Alphabet GOOG expected to spend about $800 billion on capital projects this year, nearly double 2025 levels. However, Goldman expects that earnings boost to fade as spending growth slows and depreciation rises.
Other factors supporting earnings include semiconductor margins and gains from technology companies' investment holdings. Goldman said weaker chip margins could cut S&P 500 earnings by about 10%, while investment gains that helped second-quarter profits are expected to contribute less in 2027.