On Wednesday, the latest surge in Nvidia’s (NVDA) stock drove the S&P 500 and Nasdaq to new highs. Nvidia’s share price rose 2.3%, marking its sixth consecutive day of gains and making it the first company to reach a market capitalization of $5.5 trillion during intraday trading. The S&P 500 gained 0.6%, the Nasdaq rose 1.2%, while the Dow Jones edged down 0.1%.
Driven by the AI boom, corporate earnings expansion, and the resilience of the U.S. economy, Wall Street has grown increasingly optimistic about the outlook for U.S. stocks. Mike Wilson, a well-known strategist at Morgan Stanley (MS) who had long maintained a cautious stance, has now fully turned bullish. Wilson’s latest forecast projects the S&P 500 to reach 8,300 points over the next 12 months, representing an approximately 12% gain from current levels, and expects the index to approach 8,000 points by the end of this year. The bank has also raised its year-end forecast for the S&P 500 from 7,800 to 8,000 points. If this forecast materializes, the rally in U.S. stocks over the next few years would be one of the strongest since the dot-com bubble era of the 1990s.
Wilson stated that corporate earnings growth will remain the core driver of stock market gains over the next 12 months, with accelerating AI adoption, improved operating leverage, and continued corporate efficiency enhancements further strengthening earnings performance. He noted that despite geopolitical risks, private credit issues, and industry disruptions caused by AI, corporate earnings data has shown resilience. He expects S&P 500 companies to achieve earnings per share of $339 in 2026 and $380 in 2027, both above market consensus. Unlike Wall Street’s current concentrated bets on large-cap tech stocks, Wilson believes that market leadership and earnings growth will further broaden in the future. He currently favors the industrial, financial, and consumer discretionary sectors, while upgrading the healthcare sector to “neutral.”
Although recent geopolitical conflicts pushed international oil prices briefly above $100 per barrel and triggered a nearly 10% technical correction in the S&P 500 at the end of March, Wilson believes this is not a “late-cycle shock” that would end the economic cycle. He pointed out that, unlike historical oil price shocks that led to economic recessions, U.S. corporate earnings are not slowing but are instead accelerating. He also acknowledged that the biggest concern in the market remains the risk that Middle East wars could drive up inflation and cause the Federal Reserve to maintain high interest rates for longer. However, Wilson argues that as long as inflation does not trigger a new round of rate hikes, revenue growth and improved pricing power for companies will instead become key supportive factors for the stock market.
