Barclays has raised its year-end forecast for the S&P 500 index from 7,800 to 7,950, leaving about 4% potential growth from the last index close at 7,636.36 on September 9. The bank justified the decision with sustained demand for artificial intelligence solutions and recurring results from Big Tech companies, which exceeded analysts' expectations and showed readiness to raise recommendations, supporting corporate earnings momentum.
Venu Krishna, head of US equity strategy at Barclays, raised the S&P 500 earnings forecast for 2026 to $365 per share from $337, and the 2027 forecast to $414 from $389, while the 2027 index target remained at 8,800. Big Tech earnings grew by 35% year-over-year in the second quarter, up from 30% in the previous period, while the rest of the tech sector's earnings jumped by 88%. According to LSEG data, 86% of the 492 S&P 500 companies that reported exceeded analysts' estimates, significantly above the long-term average of 67.5%. According to Barclays strategists, the tech sector continues to show outstanding beat/miss ratios, with healthcare and energy also showing strength, while real estate and utilities lag behind. Krishna expects hyperscalers' capital expenditures to exceed $1.1 trillion in 2027, up 67% from the previous year, with expected growth slowing in 2028, although spending is still projected to grow by about 30%. Google and Amazon are expected to be the largest players, with Meta close behind.
Other major banks have also raised their year-end forecasts for the benchmark index. JPMorgan raised its year-end target to 8,000, research firm CFRA now expects the index to reach 8,050, and HSBC raised the S&P 500 target to 8,100 from 7,650, citing strong earnings and ongoing AI infrastructure spending. However, Barclays remained conservative about the estimates, expressing doubt about how sustainable AI spending will be, given sticky inflation, geopolitical uncertainty, and a tighter interest rate trajectory. The concentration of growth in AI stocks, which account for about 45% of the S&P 500's market capitalization and have driven nearly all of the index's increase this year with an 11.55% gain, contrasts with the US 500 Excluding Artificial Intelligence Enablers Price Return Index (SPXXAI), which stands at 3,197.09 with a 4.48% annual gain and still lags the broader benchmark by about seven percentage points. Achieving the 7,950 target will depend more on whether hyperscalers continue to fund capital projects than on broad market performance.