Goldman Sachs strategists, led by Ben Snider, increased their S&P 500 year-end target to 8,000 points, up from a previous forecast of 7,600. This adjustment reflects their expectation that earnings growth, fueled by the artificial intelligence (AI) boom, will drive further gains in stocks. This aligns with similar optimistic outlooks from peers at Morgan Stanley and Deutsche Bank AG, projecting a 17% return for the S&P 500 Index this year.
Despite this bullish outlook for the broader market driven by AI, there's a nuanced view within the AI sector. Some strategists, like Jay Woods of Freedom Capital Markets, suggest the overall "AI trade" might be cooling, noting that momentum and RSI indicators were showing divergence. However, the underlying suppliers, particularly chipmakers, are quietly winning. For instance, Broadcom reported Q2 FY2026 AI semiconductor revenue of $10.8 billion, a 143% year-over-year increase, with Q3 guidance around $16.0 billion, indicating over 200% year-over-year growth. NVIDIA's Data Center revenue surged to $75.25 billion, up 92% annually, with Data Center Networking up 199%.
Goldman Sachs Asset Management’s Brook Dane observes that the current AI investment cycle is seeing massive capital deployment directly translate into profit growth, distinguishing it from past speculative bubbles. Hyperscaler AI CAPEX is projected to rise from $650 billion this year toward $1 trillion in 2025. Dane highlights semiconductor infrastructure, including GPUs, ASICs, and optical solutions, alongside data security, as the most compelling sectors. Micron Technology exemplifies this, with its Q3 2026 revenue surging to $41.46 billion, significantly beating the consensus of $35.82 billion, driven by strong AI memory demand and $22 billion in customer commitments. Its stock price reached $1,048 per share, with analyst James Schneider raising his price target to $1,100.
However, Goldman Sachs maintains a "Neutral" rating on Micron despite the upward price target revision, citing valuation and timing concerns after its significant rally. They acknowledge stronger fundamentals and tighter supply but worry the market has already priced in much of the good news. Similarly, American chip names saw sell-offs in sympathy with a nearly 10% drop in South Korea’s Kospi due to foreign investors dumping semiconductor shares. Despite this, semiconductors now constitute a record almost 20% of the S&P 500, with iShares Semiconductor ETF (SOXX) up 77% year to date, largely driven by companies like Micron, AMD, Intel, Broadcom, and Nvidia.
