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UBS has raised its S&P 500 forecast to 7,500 by the end of 2026, according to a note seen Monday from the bank’s global economics and markets outlook, citing higher earnings expectations and continued gains in tech, specifically from Nvidia and Microsoft.
The upward revision reflects confidence in the earnings power of large-cap companies and a tech sector that continues to drive the bulk of corporate profits.
The bank now projects 14.4% earnings growth for the S&P 500 in 2026, with nearly half of that growth coming from tech alone.
UBS said the market is still being pushed by AI momentum, but noted that other sectors may soon begin contributing. The firm sees a transition ahead, where capital spending starts to spread beyond tech.
“We expect capex to eventually widen out of the narrow tech sector and growth to become more broad-based,” the report said.
The bank warned that the next four to five months may bring a soft patch as tariffs impact prices, but expects global growth to bounce as consumer confidence improves and rates fall.
UBS sees U.S. growth betting entirely on AI
UBS called U.S. growth “essentially one big bet on AI,” pointing out that most current investment is focused on technology and data infrastructure. That view has support across Wall Street.
Multiple economists have credited the AI boom with keeping the U.S. economy above water, even as rates remain elevated and trade tensions persist under the current administration.
UBS estimated capital expenditures linked to AI added 78 basis points to GDP growth in the first half of the year. When including spending on software, R&D, and related areas, that figure jumps to 1.4 percentage points.
UBS described those numbers as “eye-watering,” and compared them to the massive tech buildout of the late 1990s, when investment in computers, software, and internet infrastructure helped launch a decade of rising productivity and expanding profits.
The bank argued that the same dynamic could be unfolding again, only this time with AI and semiconductors at the core.
Meanwhile, Citi has increased its price target for Nvidia ahead of the company’s third-quarter report due November 19. The bank now sees shares at $220, up from $210, and maintains its buy rating.
Analyst Atif Malik expects Nvidia to post $56.8 billion in sales, above Wall Street’s $54.6 billion estimate. “We revise our Oct-Q estimates by +11% following stronger-than-expected AI investments showcased by NVDA’s announcement of already reaching 6M units of Blackwell,” Malik wrote.
Malik also raised his projection for the 2028 data center semiconductor market, now expecting a total addressable size of $654 billion, up from $563 billion. He wrote that Nvidia is likely to beat expectations again.
“We expect ‘beat and raise’ Oct-Q results on 11/19. We model Oct-Q sales of $57B above Street ~$55B and expect Jan-Q guide of $62B vs Street ~$61B,” he added. Malik also said Nvidia’s price-to-earnings ratio of 28x looks cheap compared to AI peers like Broadcom and AMD, which trade at 38x and 37x, respectively.
UBS plays down fears of bubble risk
Some investors have raised concerns about whether the current AI-driven rally is sustainable, with valuations already sitting near 22 times forward earnings, far above the five-year average. UBS pushed back on bubble fears.
“The drama of a bubble inflating and exploding isn’t inevitable,” the bank wrote. “We could just see the market rising strongly in 2026 and then stalling in 2027. The key is to monitor the passthrough of AI productivity to non-tech companies.”
UBS made clear that its bullish S&P 500 outlook isn’t based on valuation multiples rising. The bank expects corporate profits and productivity gains to carry the next leg of the market.
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