JPMorgan has increased its 2026 S&P 500 price target to 8,000 from 7,800, pointing to an exceptionally strong second-quarter earnings season and growing evidence that massive artificial intelligence investments are translating into stronger business performance. The bank also raised its earnings forecasts for both 2026 and 2027, although elevated interest rates, geopolitical risks and heavy capital-market supply are keeping its valuation assumptions in check.
Second-quarter earnings deliver broad strength
With 87% of S&P 500 companies having released their results, JPMorgan strategists led by Dubravko Lakos-Bujas said the earnings picture “remains strong and broad-based across multiple sectors.”
The strength has encouraged the bank to lift its 2026 earnings-per-share forecast to $365, representing growth of 35% from the previous year.
That estimate also stands above the current consensus forecast of $358.
For 2027, JPMorgan increased its EPS projection to $420, implying another 15% increase.
Private-company valuations provide additional EPS boost
Part of the unusually strong earnings growth is coming from gains in the value of private-company investments held by listed businesses.
JPMorgan estimates that these valuation adjustments contributed approximately $18 to S&P 500 EPS based on marks recorded during the first half of 2026.
Removing that effect would leave normalised 2026 EPS at approximately $347.
Even on that adjusted basis, earnings would still be growing around 28% year over year, highlighting the underlying strength of corporate profitability.
Valuation multiple remains around 20 times earnings
Despite what JPMorgan described as “one of the strongest fundamental backdrops since GFC,” the bank has not increased the forward valuation multiple supporting its S&P 500 target.
Its assumption remains at approximately 20 times forward earnings.
Several risks are preventing the strategists from assigning a higher multiple, including interest rates remaining elevated for longer, continuing geopolitical uncertainty and substantial amounts of new equity and debt that financial markets still need to absorb.
Instead, the higher index target is primarily being driven by stronger earnings expectations.
AI spending shifts towards monetisation
One of the biggest developments during earnings season has been the changing conversation surrounding hyperscaler artificial intelligence investment.
Investors have increasingly shifted their attention from the scale of AI capital expenditure towards whether that spending can produce attractive returns on invested capital.
JPMorgan believes the latest results provided encouraging evidence that monetisation is beginning to emerge.
The strongest examples came from Google, Amazon and Microsoft, where “stronger cloud growth, backlog expansion, and improved operating cash flow visibility cleared a high investor expectation bar.”
AI capital expenditure approaches $900 billion
The scale of investment continues to increase rapidly.
Consensus forecasts now indicate that AI-related capital expenditure could reach approximately $900 billion by the end of 2026.
That would represent an increase of around 85% year over year.
Spending is then expected to exceed $1.2 trillion by the end of 2027 as hyperscalers continue expanding data centres and computing infrastructure.
These enormous investment programmes remain a central driver of demand across semiconductors, networking equipment, power infrastructure, cooling systems and other parts of the AI supply chain.
AWS, Azure and Google Cloud show powerful demand
Cloud growth rates provided some of the clearest evidence that AI investment is translating into stronger customer demand.
AWS revenue growth accelerated to 37% year over year, while Microsoft’s Azure expanded 43%.
Google Cloud delivered the strongest increase, with revenue climbing a record 82%.
Backlogs also expanded sharply.
Google Cloud’s backlog increased by $52 billion from the previous quarter to $514 billion.
AWS backlog reached $496 billion, representing a 36% sequential increase and almost 2.5 times its level from a year earlier.
The figures provide hyperscalers with substantial revenue visibility as they continue investing heavily in additional capacity.
Free cash flow becomes key concern
While revenue and earnings trends remain impressive, JPMorgan highlighted a growing divergence between hyperscaler profits and free cash flow.
Trailing-12-month net income across the group has reached $599 billion, compared with only $169 billion of free cash flow.
That creates a $430 billion gap.
The contrast with the end of 2023 is particularly significant, when net income and free cash flow were approximately equal.
The deterioration largely reflects the enormous capital requirements associated with building AI infrastructure.
Most hyperscalers could face negative free cash flow
JPMorgan expects the pressure on cash generation to persist as AI investment continues accelerating.
With the exception of Microsoft, the bank’s analysts forecast negative free cash flow for most hyperscalers during the 2026-2027 period.
That could increase reliance on debt markets, equity issuance or other financing sources to support investment programmes.
However, the combination of accelerating cloud growth, rapidly expanding backlogs and improved operating cash flow visibility suggests the enormous spending programmes are increasingly producing measurable commercial returns.
Stronger earnings support S&P 500 path to 8,000
JPMorgan’s higher S&P 500 target ultimately reflects stronger corporate earnings rather than a willingness to pay substantially higher valuations.
The bank now expects 2026 EPS of $365 and 2027 EPS of $420, while retaining a forward multiple of roughly 20 times.
AI remains central to the outlook. Rapid cloud growth and record backlogs are strengthening confidence that hyperscalers can monetise their enormous infrastructure investments, although declining free cash flow remains an important risk.
Against that backdrop, JPMorgan now sees the S&P 500 reaching 8,000 in 2026, up from its previous target of 7,800.