Temporary Earnings Bump, Not a Bubble: Goldman Sachs on S&P 500

Goldman Sachs has found that S&P 500 companies are 'over-earning,' but this is seen as a temporary phenomenon rather than an earnings bubble. The S&P 500's EPS grew by 51% year-over-year in Q2 2026, exceeding post-recession rebounds in 2010 and 2021.

This exceptional growth has pushed earnings well above their long-term trend and historical relationship with GDP growth. Despite the cyclically-adjusted price-to-earnings ratio being near record highs, the forward 12-month P/E multiple has actually declined from 23x a year ago to 19x today, matching its 10-year average.

Goldman identified three temporary factors driving 'over-earning': the AI investment boom, semiconductor margin expansion, and appreciating equity stakes. The AIQ AIEQ investment boom accounts for nearly half of S&P 500 EPS growth this year, with mega-cap hyperscalers on track to spend $800B on capex in 2026.

Mega-cap tech companies XLK generated over $150B in 'other income' from private investment gains in Q2 2026, accounting for 12% of S&P 500 EPS. Goldman expects this contribution to diminish significantly in 2027, creating an 8 percentage point drag on year-over-year growth comparisons.