Wall Street’s AI-driven rally just got another vote of confidence.
UBS (UBS) raised its S&P 500 (^GSPC) forecast to 7,500 by the end of 2026 in a note on Monday, citing strong corporate earnings and gains in a resilient technology sector.
According to the bank’s just-published global economics and markets outlook, UBS forecasts S&P 500 earnings growth of 14.4% year over year in 2026. About half of those gains are expected to come from the technology sector — a sign the so-called “Magnificent Seven” will keep powering overall corporate profits, even as other sectors play catch-up.
The firm described the current setup as a market still defined by AI momentum, but one that’s starting to broaden beyond megacap tech, a key development for sustaining and extending the current bull market.
“We expect capex to eventually widen out of the narrow tech sector and growth to become more broad-based,” the report said.
UBS expects that shift to take hold after a “soft patch over the next four to five months as tariffs continue to work their way through to prices,” followed by a period of global growth acceleration as business and consumer confidence improve and interest rates fall.
At the same time, UBS said US growth is “essentially one big bet on AI,” with investment concentrated in technology and data infrastructure.
That view has been echoed across Wall Street, with economists crediting the boom in AI spending for keeping the US economy out of a recession even amid higher rates and trade tensions.
UBS estimated that such capital expenditures contributed 78 basis points to GDP growth in the first half of the year, or about 1.4 percentage points when including software, research, and development.
The firm called those figures “eye-watering,” saying the surge in spending mirrors the technology build-out of the late 1990s, when a wave of investment in computers, software, and internet infrastructure fueled a decade-long boom in productivity and corporate profits.
That surge has also fueled one of Wall Street’s hottest debates — whether today’s AI frenzy is sustainable or setting up for a bubble. Stocks are already trading near 22 times forward earnings, well above their five-year average, suggesting much of the good news is already priced in.
UBS, however, struck a more measured tone. “The drama of a bubble inflating and exploding isn’t inevitable,” the firm wrote. “We could just see the market rising strongly in 2026 and then stalling in 2027. The key is to monitor passthrough of AI productivity to non-tech companies.”
