Goldman Sachs strategist Ben Snider has pushed back against concerns of a U.S. earnings bubble, asserting that while a slowdown in earnings growth is anticipated, a collapse is not. In a report published on September 17, 2026, Goldman Sachs noted that S&P 500 earnings per share (EPS) surged 51% year-over-year in Q2 and 26% over the past four quarters. Despite this strong performance, Snider forecasts an 11% EPS growth rate for both 2027 and 2028, leading to projections of $415 in 2027 and $460 in 2028. This outlook aligns closely with the bottom-up market consensus of $419 for 2027 and surpasses the median top-down strategist forecast of $403.
Snider identified three temporary factors that have propelled the current above-normal earnings: substantial AI-related capital expenditures, multi-decade high semiconductor profit margins, and equity investment gains from large technology companies. AI capital expenditures, in particular, accounted for nearly half of this year's earnings growth, with hyperscalers projected to spend $800 billion in 2026, a 94% year-over-year increase. This spending has significantly benefited semiconductor, technology hardware, industrial, and utility companies.
However, these tailwinds are expected to wane. Goldman Sachs anticipates that the pace of AI capital expenditure growth will slow, leading to increased depreciation expenses that will significantly drag on profit growth by 2027 and largely offset the AI investment boost by 2028. Semiconductor gross margins, currently around 70%, are also expected to see a slower pace of expansion next year, and a potential decline to the 15-year average of 55% could reduce S&P 500 earnings by approximately 10%. Additionally, the $150 billion in equity investment gains that boosted Q2 2026 EPS by 12% are expected to decline significantly in 2027.
Despite the anticipated normalization, Snider maintains a positive outlook, driven by an expected 14% return for the S&P 500 over the next 12 months, targeting 8,700. He emphasizes that earnings growth, rather than valuation expansion, is the primary driver of the current bull market. While the AI-related profit boost may become neutral or even negative, the underlying strength of corporate earnings is expected to persist, albeit at a more sustainable rate.
