Wall Street received another vote of confidence as UBS raised its S&P 500 forecast to 7,500 by 2026 due to strong corporate earnings and gains in the technology sector. UBS expects S&P 500 earnings to grow by 14.4% in 2026, with half of the gains coming from the technology sector.

The current market momentum is defined by AI, but UBS predicts a broadening beyond tech. UBS anticipates a shift in capital expenditure from tech to a more broad-based growth after a soft patch due to tariffs, leading to global growth acceleration.

UBS highlights the US economy’s reliance on AI and technology infrastructure investments. Economists credit the boom in AI spending for keeping the US economy afloat amidst higher rates and trade tensions. Capital expenditures contributed significantly to GDP growth in the first half of the year.

The surge in AI investments has sparked a debate on whether it is sustainable or leading to a bubble. UBS remains cautiously optimistic, stating that a bubble isn’t inevitable and that monitoring AI productivity in non-tech companies is key. Stocks are already trading above their five-year average, raising concerns about overvaluation.

Read more at Yahoo Finance: UBS sees S&P 500 hitting 7,500 by year-end 2026, fueled by AI and strong corporate profits