JPMorgan raised its year-end S&P 500 price target to 7,800 on Wednesday, pointing to what it described as an unprecedented cycle of earnings upgrades.
The bank said the artificial intelligence investment boom and improving geopolitical conditions following progress toward U.S.-Iran peace have strengthened the outlook for American equities.
AI Spending Drives Earnings Upgrades
In its mid-year market outlook, JPMorgan analyst Dubravko Lakos-Bujas said consensus earnings growth forecasts for the next two years have increased by approximately 20% on average.
The revisions have occurred alongside a near doubling of capital expenditure linked to artificial intelligence.
Companies have continued to increase spending on AI infrastructure, computing capacity and related services. JPMorgan believes this investment cycle is providing significant support for corporate earnings growth.
JPMorgan Raises S&P 500 Earnings Forecast
The bank increased its 2026 S&P 500 earnings-per-share estimate to $350. This would represent annual growth of approximately 29%.
JPMorgan expects S&P 500 earnings per share to reach $390 in 2027. However, that estimate remains below the current market consensus.
The more cautious 2027 projection reflects the possibility that companies could experience weaker pricing power as competition across the AI sector increases.
Earnings Revisions Described as Unprecedented
JPMorgan said positive earnings revisions of this scale are usually seen only after a major economic shock or during a recovery from recession.
This time, the main catalyst has been the sharp increase in corporate capital expenditure announced during the latest earnings season.
The bank also highlighted an April announcement involving Anthropic, which it believes strengthened confidence in the commercial potential of AI services.
S&P 500 Rally May Face Volatility
Despite its bullish S&P 500 target, JPMorgan warned that the market’s path higher is unlikely to be smooth.
Lakos-Bujas pointed to extreme investor concentration in momentum stocks, especially among lower-quality companies and speculative growth shares.
According to the analyst, these crowded areas of the market face a high risk of a sudden flash crash if investor sentiment changes quickly.
Monetary Policy Could Limit Valuations
JPMorgan also identified rising equity supply and potentially tighter monetary policy as risks to the stock market outlook.
Higher interest rates or restrictive Federal Reserve policy could limit how much investors are willing to pay for corporate earnings.
As a result, even strong earnings growth may not produce a consistent expansion in stock-market valuation multiples.
Technology, Defense and Banks Remain Favored
JPMorgan remains overweight technology stocks, companies positioned upstream in the AI supply chain, defense businesses and banks.
The bank is also seeing increasing value in the healthcare sector.
However, JPMorgan believes energy stocks may be ready for profit-taking after gaining approximately 19% since the beginning of the year.
