Goldman Sachs analysts argue that the recent surge in corporate profits is supported by tangible AI investments rather than speculative activity. Strategist Ben Snider notes that the S&P 500 saw approximately 30% year-over-year profit growth in the first two quarters of 2026, with cumulative growth reaching 26% over the previous four quarters.
AI-related capital expenditures accounted for 11 percentage points of earnings growth in 2026. Additionally, semiconductor companies currently report gross margins of around 70%, significantly higher than the 15-year historical average of 55%. The bank identifies these expenditures, semiconductor margins, and equity investment gains as the primary drivers of profit.
The bank projects that AI capital expenditure contributions will fall to 7 percentage points in 2027 and turn slightly negative by 2028. If semiconductor margins return to their 15-year average, S&P 500 earnings could decline by approximately 10%. Goldman Sachs expects these three growth catalysts to weaken starting in 2027.
Goldman Sachs sets a 12-month price target for the S&P 500 at 8,700, representing a 14% increase from current levels. The bank forecasts earnings per share of $415 in 2027 and $460 in 2028, reflecting 11% annual growth. The current forward price-to-earnings ratio is 19x, matching the 10-year average.
