TechFlow News, June 8: Citigroup stated that profit growth driven by AI infrastructure development is expected to propel the S&P 500 Index above the 8,000-point mark by 2026. The bank raised its year-end target for the S&P 500 Index to 8,100 points—representing over 9.5% upside from last Friday’s closing price—up from its previous target of 7,700 points. Strategist Tobias Levkovich forecasts S&P 500 earnings per share (EPS) will reach $350 in 2026 and rise to $400 in 2027. Levkovich said: “The AI tailwind is driving a sharp acceleration in fundamentals across related sectors, and we remain highly confident that earnings will continue to exceed expectations through year-end.”
He noted that positive earnings surprises were unusually widespread in Q1—though unlikely to persist—yet the surprise rate is expected to remain above normal levels over the next several quarters. Levkovich believes earnings growth will replace valuation expansion as the primary driver of the index. He added that while uncertainties surrounding U.S.-Iran tensions, inflation, and the interest-rate path may trigger volatility, AI-related spending remains investors’ key focus. Regarding concerns about an AI bubble, Levkovich contends that market enthusiasm for AI-driven growth is far from over. “We are still in the middle innings; forward P/E ratios will gradually moderate, and earnings growth will need to shoulder greater responsibility,” he said. (Jin10)
