Key Takeaways
- Goldman Sachs increased its S&P 500 year-end projection to 8,000 from 7,600
- The upcoming Q2 earnings cycle, kicking off in mid-July, represents a crucial validation point for equity markets
- Artificial intelligence infrastructure investments are projected to fuel approximately 50% of S&P 500 profit expansion in 2026
- Hedge funds liquidated technology positions at an unprecedented rate during the week ending June 25
- The Magnificent Seven stocks shed more than $2.3 trillion in combined valuation throughout June
On May 26, Goldman Sachs elevated its S&P 500 year-end projection to 8,000, marking an increase from its previous 7,600 forecast. Ben Snider, the firm’s leading U.S. equity strategist, outlined this perspective in a research note dated June 28.
The foundation of Goldman’s thesis is remarkably clear. The 2026 stock market advance has been powered predominantly by profit expansion rather than valuation multiple expansion.
Snider characterized the upcoming Q2 earnings cycle as “a critical test.” Should corporations meet or exceed expectations, the market rally maintains its fundamental justification. Should they fall short, the market’s underlying framework confronts its most significant hurdle this year.
Goldman’s Earnings Projections Breakdown
Goldman’s earnings-per-share projection for the S&P 500 in 2026 sits at $340, representing a 24% year-over-year advancement. Looking ahead to 2027, the firm anticipates $385 per share, marking an additional 13% climb.
FactSet data indicates Q2 earnings expansion of 22%, an increase from the 18.7% estimate at quarter’s beginning. Revenue growth projections stand at 12.1%, representing the most robust growth trajectory since Q2 2022.
Corporations falling short of analyst expectations are experiencing severe market punishment. Earnings misses have triggered average stock declines of 4.2%, substantially exceeding the historical norm of 2.9%.
With the S&P 500 currently positioned around 7,365, Goldman’s 8,000 target suggests approximately 9% additional upside potential.
Artificial Intelligence Expenditure Anchors the Bull Case
Goldman maintains that AI infrastructure spending will contribute roughly half of all S&P 500 earnings expansion in 2026.
The dominant technology corporations are anticipated to allocate approximately $754 billion toward capital expenditures this year. This represents an 83% surge from 2025 levels. Goldman forecasts this figure climbing to $905 billion in 2027.
Goldman’s proprietary basket of AI data center construction-related equities has generated nearly 60% returns year-to-date. While semiconductors remain the primary direct beneficiaries, hardware manufacturers, industrial companies, and utilities are also experiencing earnings tailwinds.
The S&P 500 currently trades at approximately 21 times forward earnings, a multiple exceeding roughly 87% of historical observations across the past four decades. Goldman contends that near-record corporate profit margins combined with relatively accommodative interest rates warrant this premium valuation.
The seven largest technology stocks — Nvidia, Apple, Alphabet, Microsoft, Amazon, Broadcom, and Meta — collectively report a 44% return on equity. Goldman estimates this metric will contract by an average of 700 basis points next year as depreciation expenses increase at major technology firms.
Hedge Funds Slashing Technology Allocations Aggressively
While Goldman maintains its optimistic earnings outlook, hedge funds are systematically reducing technology sector exposure.
Goldman’s proprietary data reveals that during the week concluding June 25, hedge funds liquidated technology stocks at the most aggressive pace since the bank initiated tracking in 2016.
The Magnificent Seven — Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta, and Tesla — constituted roughly 21.5% of hedge fund U.S. equity portfolios at 2026’s outset. This concentration has plummeted to 14.5%, marking the steepest six-month decline since the 2022 bear market.
This cohort eliminated over $2.3 trillion in aggregate market capitalization during June exclusively.
Goldman’s primary scenario maintains that robust earnings performance, driven by AI-related spending, will underpin equity markets through year-end. Q2 corporate reporting commences in mid-July, with major banking institutions leading the disclosure schedule.
