Despite market concerns over macro headwinds such as a potential U.S. government shutdown and the debt dilemmas of developed nations, and despite massive AI investments potentially masking deeper issues in the U.S. economy, Wall Street analysts are growing increasingly optimistic about the profit outlook for U.S. companies. Coupled with the trend of earnings consistently exceeding expectations this year, the driving force behind the U.S. stock market’s repeated record highs is expected to continue.
In the current complex period marked by renewed uncertainty surrounding Trump’s China tariff policies, intertwined risks of a government shutdown, and expanding debt, the U.S. earnings season appears particularly crucial. Judging from the general expectations on Wall Street and the already disclosed results, the “Magnificent Seven” tech giants, which hold significant weight in the S&P 500 index, along with leading companies in the AI computing power industry chain like Broadcom (AVGO) and AMD (AMD), are expected to deliver strong report cards, continuing to propel the U.S. stock market to new highs.
Currently, “corporate earnings, not macro factors” are taking a central role in global equity market pricing. Wall Street’s confidence in U.S. corporate profits has significantly warmed, especially regarding the tech giants and core AI computing power companies driving this bull market—they remain at the intersection of actively upwardly revised earnings expectations and the delivery of better-than-expected results. This provides a solid “fundamental earnings drive” for the rise of U.S. stocks and even global benchmark indices.
Analysts at Goldman Sachs (GS) emphasize that this wave of AI investment is still in its “early innings.” Their primary basis is that AI applications like ChatGPT and Claude have already begun to enhance production and operational efficiency in practical enterprise deployments, and realizing these improvements requires immensely vast AI computing power infrastructure as support.
Indicators from Yardeni Research show that Wall Street analysts are raising profit expectations across the board. In seven of the S&P 500’s 11 sectors, the number of estimate increases outnumbers decreases, the highest ratio recently. The technology, financials, communication services, and healthcare sectors are leading the way. This optimism is supported by actual data: since this earnings season began, approximately 82% of the U.S.-listed companies that have reported have beaten Wall Street’s profit expectations, slightly better than the long-term average. Meanwhile, profits at major commercial banks like JPMorgan Chase (JPM), Goldman Sachs, Bank of America (BAC), and Morgan Stanley (MS) have also generally exceeded expectations.
Historical data also provides backing for the bullish camp. Statistics from Deutsche Bank show that the S&P 500 index has risen 75% of the time during earnings seasons. Ed Yardeni, founder of Yardeni Research, believes: “When Wall Street analysts as a whole are raising earnings estimates, that tends to provide strong support for a bullish market atmosphere.”
Based on this, analysts from institutions including Deutsche Bank, Bank of America, Barclays, and Wells Fargo have raised their year-end targets for the S&P 500 index. Julian Emanuel, an analyst at Evercore ISI, is even more aggressive. He expects that, driven by this “once-in-a-generation” transformative shift of AI, the S&P 500 could climb to 7750 by the end of 2026, potentially even reaching 9000 under an “AI-driven asset bubble” scenario. He emphasizes that any market pullbacks along the way represent buying opportunities, and that the proliferation of AI will continue to drive both corporate earnings and valuations higher.
