Since April, strong corporate earnings data and market enthusiasm for AI have jointly driven the continuous rise of US stocks, repeatedly setting new historical records. Against this backdrop, numerous top analysts are racing to raise their year-end and future outlooks for the S&P 500 index. Many analysts who were previously cautious have also revised their forecasts, consistently increasing their target levels to keep pace with the market’s upward trend. Analysts generally expect that the earnings and return on investment for the index’s constituents will continue to expand in 2025 and 2026. The 7000-point level has become a new psychological anchor for the market, with most predictions suggesting the index will reach this level by the end of this year or early next year.
Goldman Sachs’ Head of Hedge Fund Business, Pasquariello, elaborated on the bullish rationale in a report. From a historical perspective, he pointed out that when economic growth remains resilient, the Federal Reserve begins a rate-cutting cycle, and the stock market is near historical highs, subsequent market performance tends to be very positive. He believes that, coupled with the catalytic effect of artificial intelligence technology, the primary trend for global stock markets remains upward. Therefore, he advises investors to “firmly hold the stocks they want to hold” and revealed that he prefers the Nasdaq 100 index over the Russell 2000 index, while also suggesting using the options market to manage potential risks.
Although the market has risen continuously and entered overbought territory, Pasquariello emphasized that investors should neither fight against this AI-led bull market nor excessively chase the rally. He acknowledged that the current positioning and risk-reward are not perfect but firmly opposes contrarian short selling of those leading US mega-cap tech stocks. Goldman Sachs’ own prime brokerage data also shows that while the total exposure of hedge funds has increased, net exposure remains constrained, indicating that market participants are not taking excessive risks. This suggests there is still room for the market to absorb new funds.
The core driving force behind this bull market is undoubtedly artificial intelligence. Recent substantial increases in global memory chip prices, along with far better-than-expected earnings and contract backlogs from AI computing infrastructure giants like Oracle and Broadcom, have significantly strengthened the market’s “long-term bull market narrative.” The computing power demand arising from AI training to inference applications is described as “vast as the stars and oceans,” expected to drive exponential growth in related markets. It is precisely under the leadership of the epic rallies in giants like NVIDIA, Meta, TSMC, that an unprecedented wave of AI investment enthusiasm has swept across global stock markets.
Several Wall Street institutions also believe this rally is not over yet. Goldman Sachs has raised its 6-month and 12-month targets for the S&P 500 index to 7000 and 7200 points, respectively. Analysts from Deutsche Bank and Barclays have also raised their year-end targets to around 7000 points.
