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Goldman Sachs raised its 2026 S&P 500 target to 8000 on strong AI-driven earnings growth.
Strong Q1 earnings and AI capex trends continue to support S&P 500 ETF momentum.
Elevated valuations, Fed risks and narrow AI-led rallies could increase market volatility.
The S&P 500 has delivered a strong performance so far in 2026 despite the Iran war. Robust technology and energy earnings, the ongoing artificial intelligence (AI) boom, and still-resilient global and U.S. economic growth have supported the rally. The index has gained 10.6% year to date (as of May 28, 2026) and advanced about 6.2% over the past month.
VOO First ETF to Reach $1 Trillion
The Vanguard S&P 500 ETF (VOO - Free Report) has made history last week as the first exchange-traded fund (ETF) to surpass $1 trillion in assets under management. Vanguard confirmed that the milestone was reached on Jun 2, 2026 marking a landmark achievement for both the fund and the broader ETF industry. Closer peers State Street SPDR S&P 500 ETF (SPY - Free Report) currently has around $784.63 billion in assets while iShares Core S&P 500 ETF (IVV - Free Report) boasts about $859.5 billion in assets. VOO and IVV charge 3 bps while SPY charges 9 bps in fees.
Goldman Sachs Turns More Bullish on the S&P 500
Goldman Sachs Research raised its year-end 2026 target for the S&P 500 to 8000 from 7600, implying a 6% upside from May 26 levels. The upgrade reflects stronger earnings expectations rather than higher stock valuations.
The firm now expects S&P 500 earnings per share (EPS) to reach $340 in 2026, representing 24% annual growth, followed by $385 in 2027, implying another 13% increase.
AI Boom Continues to Drive Earnings Growth
Goldman Sachs expects companies benefiting from artificial intelligence (AI) infrastructure spending to contribute roughly half of total S&P 500 earnings growth this year and next.
The brokerage estimates that major hyperscale technology companies will spend nearly $754 billion in capital expenditures in 2026, up 83% from 2025 levels, with spending projected to rise further to $905 billion in 2027.
Semiconductor firms remain the biggest direct beneficiaries of AI spending, while technology hardware, industrial and utility companies are also seeing strong earnings support from the AI buildout.
S&P 500 Earnings Update
The Q1 earnings season has come to an end for 9 of the 16 Zacks sectors, with results from 462 S&P 500, or 92.4% of the index’s membership, already out through May 20, 2026. The aggregate earnings total for Q1 is on track to be a new all-time quarterly record at $689.8 billion, surpassing the record set in the preceding quarter at $655.4 billion.
Total Q1 earnings for the 462 S&P 500 companies that have already reported results are up +21.1% from the same period last year on +10.4% higher revenues, with 79.9% beating EPS estimates and 78.6% beating revenue estimates. This is a better showing from these companies relative to other recent periods.
The Q1 earnings season remained strong, with companies comfortably beating estimates and signaling economic resilience despite elevated energy costs and other risks. Revenue growth and beat rates stayed robust, while earnings estimates for current and upcoming quarters continued to move higher.
Valuations Remain Slightly-Elevated
The S&P 500 currently trades at roughly 21 times forward earnings, placing valuations in the 88th percentile compared with the past 40 years, per Goldman Sachs.
Despite slightly rich valuations, Goldman Sachs expects multiples to remain relatively stable through year-end. Lower Treasury yields may support valuations, but that benefit could be offset by slower economic growth, geopolitical uncertainty and investor skepticism surrounding the durability of AI-driven profits.
Historically, S&P 500 PE Ratio reached a record high of 131.391 and a record low of 5.31, the median value is 18.01, per Guru Focus. Moreover, we believe that thanks to the war-led spike in inflation, the Fed may hike rates this year. If that happens, the S&P 500 may hit a roadblock.
Further Warning Signs
The recent rally has become increasingly concentrated in AI-linked stocks, leading to narrower market breadth and a sharp uptick in momentum trading. Historically, such conditions have often signaled elevated market risks.
AI-Driven Outlook for Investors in 2026
Goldman Sachs expects market returns to moderate in the coming months amid slowing economic activity, seasonal weakness ahead of U.S. midterm elections and increasingly difficult earnings comparisons.
The brokerage believes future market gains will depend heavily on whether hyperscale technology companies can generate meaningful returns from their massive AI investments.
Goldman Sachs expects AI-driven productivity gains to become more visible over time. Its forecasts include a 0.4 percentage-point boost to S&P 500 earnings growth from AI productivity in 2026 and a 1.5 percentage-point boost in 2027.
S&P 500 ETFs in Focus
Against this mixed backdrop, investors may track S&P 500 exchange-traded funds (ETFs) such as Vanguard S&P 500 ETF (VOO - Free Report) , iShares Core S&P 500 ETF (IVV - Free Report) , SPDR S&P 500 ETF Trust (SPY - Free Report) and Invesco S&P 500 Momentum ETF (SPMO - Free Report) .
Investors can also play the growth part of the index with SPDR Portfolio S&P 500 Growth ETF (SPYG - Free Report) and the value part of the index with SPDR Portfolio S&P 500 Value ETF (SPYV). SPDR Portfolio S&P 500 High Dividend ETF Fund (SPYD) is a good bet for the dividend plays of the index.
Investors with a strong stomach for risk can bet on leveraged S&P 500 ETFs like Direxion Daily S&P 500 Bull 3X Shares (SPXL - Free Report) , ProShares Ultra S&P500 (SSO - Free Report) and ProShares UltraPro S&P500 (UPRO - Free Report) if the index is on an uptrend. However, if the S&P 500 falls by any chance, inverse ETF ProShares Short S&P500 ETF (SH - Free Report) will rise.
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Guide to the S&P 500 ETF Investing
Key Takeaways
The S&P 500 has delivered a strong performance so far in 2026 despite the Iran war. Robust technology and energy earnings, the ongoing artificial intelligence (AI) boom, and still-resilient global and U.S. economic growth have supported the rally. The index has gained 10.6% year to date (as of May 28, 2026) and advanced about 6.2% over the past month.
VOO First ETF to Reach $1 Trillion
The Vanguard S&P 500 ETF (VOO - Free Report) has made history last week as the first exchange-traded fund (ETF) to surpass $1 trillion in assets under management. Vanguard confirmed that the milestone was reached on Jun 2, 2026 marking a landmark achievement for both the fund and the broader ETF industry. Closer peers State Street SPDR S&P 500 ETF (SPY - Free Report) currently has around $784.63 billion in assets while iShares Core S&P 500 ETF (IVV - Free Report) boasts about $859.5 billion in assets. VOO and IVV charge 3 bps while SPY charges 9 bps in fees.
Goldman Sachs Turns More Bullish on the S&P 500
Goldman Sachs Research raised its year-end 2026 target for the S&P 500 to 8000 from 7600, implying a 6% upside from May 26 levels. The upgrade reflects stronger earnings expectations rather than higher stock valuations.
The firm now expects S&P 500 earnings per share (EPS) to reach $340 in 2026, representing 24% annual growth, followed by $385 in 2027, implying another 13% increase.
AI Boom Continues to Drive Earnings Growth
Goldman Sachs expects companies benefiting from artificial intelligence (AI) infrastructure spending to contribute roughly half of total S&P 500 earnings growth this year and next.
The brokerage estimates that major hyperscale technology companies will spend nearly $754 billion in capital expenditures in 2026, up 83% from 2025 levels, with spending projected to rise further to $905 billion in 2027.
Semiconductor firms remain the biggest direct beneficiaries of AI spending, while technology hardware, industrial and utility companies are also seeing strong earnings support from the AI buildout.
S&P 500 Earnings Update
The Q1 earnings season has come to an end for 9 of the 16 Zacks sectors, with results from 462 S&P 500, or 92.4% of the index’s membership, already out through May 20, 2026. The aggregate earnings total for Q1 is on track to be a new all-time quarterly record at $689.8 billion, surpassing the record set in the preceding quarter at $655.4 billion.
Total Q1 earnings for the 462 S&P 500 companies that have already reported results are up +21.1% from the same period last year on +10.4% higher revenues, with 79.9% beating EPS estimates and 78.6% beating revenue estimates. This is a better showing from these companies relative to other recent periods.
The Q1 earnings season remained strong, with companies comfortably beating estimates and signaling economic resilience despite elevated energy costs and other risks. Revenue growth and beat rates stayed robust, while earnings estimates for current and upcoming quarters continued to move higher.
Valuations Remain Slightly-Elevated
The S&P 500 currently trades at roughly 21 times forward earnings, placing valuations in the 88th percentile compared with the past 40 years, per Goldman Sachs.
Despite slightly rich valuations, Goldman Sachs expects multiples to remain relatively stable through year-end. Lower Treasury yields may support valuations, but that benefit could be offset by slower economic growth, geopolitical uncertainty and investor skepticism surrounding the durability of AI-driven profits.
Historically, S&P 500 PE Ratio reached a record high of 131.391 and a record low of 5.31, the median value is 18.01, per Guru Focus. Moreover, we believe that thanks to the war-led spike in inflation, the Fed may hike rates this year. If that happens, the S&P 500 may hit a roadblock.
Further Warning Signs
The recent rally has become increasingly concentrated in AI-linked stocks, leading to narrower market breadth and a sharp uptick in momentum trading. Historically, such conditions have often signaled elevated market risks.
AI-Driven Outlook for Investors in 2026
Goldman Sachs expects market returns to moderate in the coming months amid slowing economic activity, seasonal weakness ahead of U.S. midterm elections and increasingly difficult earnings comparisons.
The brokerage believes future market gains will depend heavily on whether hyperscale technology companies can generate meaningful returns from their massive AI investments.
Goldman Sachs expects AI-driven productivity gains to become more visible over time. Its forecasts include a 0.4 percentage-point boost to S&P 500 earnings growth from AI productivity in 2026 and a 1.5 percentage-point boost in 2027.
S&P 500 ETFs in Focus
Against this mixed backdrop, investors may track S&P 500 exchange-traded funds (ETFs) such as Vanguard S&P 500 ETF (VOO - Free Report) , iShares Core S&P 500 ETF (IVV - Free Report) , SPDR S&P 500 ETF Trust (SPY - Free Report) and Invesco S&P 500 Momentum ETF (SPMO - Free Report) .
Investors can also play the growth part of the index with SPDR Portfolio S&P 500 Growth ETF (SPYG - Free Report) and the value part of the index with SPDR Portfolio S&P 500 Value ETF (SPYV). SPDR Portfolio S&P 500 High Dividend ETF Fund (SPYD) is a good bet for the dividend plays of the index.
Investors with a strong stomach for risk can bet on leveraged S&P 500 ETFs like Direxion Daily S&P 500 Bull 3X Shares (SPXL - Free Report) , ProShares Ultra S&P500 (SSO - Free Report) and ProShares UltraPro S&P500 (UPRO - Free Report) if the index is on an uptrend. However, if the S&P 500 falls by any chance, inverse ETF ProShares Short S&P500 ETF (SH - Free Report) will rise.