S&P 500's AI Fuel Tank Still Full With 7,700 Target From Citi

Citigroup has set a 7,700 year-end 2026 forecast for the S&P 500, citing strong corporate earnings and ongoing support from artificial intelligence investment.

It argued that the next phase of the AI trade will favor companies that adopt the technology rather than those that simply enable it.

The firm said AI infrastructure build-out will remain a central theme in 2026, but investors will increasingly differentiate between winners and losers as fundamentals come under pressure from high starting valuations, Reuters reported on Tuesday.

Also Read: Oracle Gains Wall Street Attention As Microsoft, Meta Fuel AI Infrastructure Boom

Citi’s projections fuel further optimism for AI tech companies.

Big Tech And Earnings Outlook Support Bullish Targets

S&P 500 index’s key components in terms of market cap include Nvidia Corp. (NASDAQ:NVDA), Apple Inc. (NASDAQ:AAPL), Microsoft Corp. (NASDAQ:MSFT), Amazon.com Inc. (NASDAQ:AMZN), Alphabet Inc. (NASDAQ:GOOGL), Meta Platforms Inc. (NASDAQ:META), Broadcom Inc. (NASDAQ:AVGO), Tesla Inc. (NASDAQ:TSLA).

Nvidia became the first company to top the $4.5 trillion market cap in October as the AI ambitions of Microsoft, Amazon, Alphabet, Meta fuel demand for its GPUs.

Citi's forecast for the S&P 500 index implies a 12.7% upside from the index's last close of 6,827.41, with the brokerage forecasting S&P 500 earnings per share of $320 by the end of next year, above the roughly $310 consensus.

Citi also warned that as the bull market enters its fourth year, volatility could increase, projecting a bull-case scenario of 8,300 and a bear-case downside of 5,700.

Wall Street Sees More Upside, But Volatility Risks Remain

JP Morgan expects the S&P 500 to finish 2026 around 7,500, driven by a resilient U.S. economy and an AI-led investment supercycle, according to global markets strategy head Dubravko Lakos-Bujas.

It bases its outlook on two additional Federal Reserve rate cuts followed by a pause, noting the index could climb past 8,000 in 2026 if policy easing goes further, Reuters reported on November 26.

Lakos-Bujas also projects 13%–15% earnings growth for the S&P 500 over the next two years, backed by strong profit growth, heavy AI spending, rising shareholder returns, and supportive fiscal policy.

Morgan Stanley expects U.S. stocks to outperform global peers in 2026, driven by accelerating AI-related capital spending, strong earnings growth, and a supportive policy backdrop, Reuters reported on November 17.

The firm forecasts the S&P 500 to reach 7,800 by the end of 2026, and sees small-cap stocks and cyclical sectors leading gains as the Federal Reserve maintains a dovish stance.

However, it cautions that uncertainty remains high, with the U.S. acting as the key swing factor for markets.

The S&P 500 Index is up 16% year to date, while the S&P 500 Semiconductor & Semiconductor Equipment Industry Index has surged more than 40%.

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