JPMorgan raises S&P 500 target for the second time in two months, stating that AI investments are starting to generate returns

JPMorgan raises its US stock target again, lifting the S&P 500 year-end target to 8,000 points, making it one of the market’s most optimistic major forecasts.

The bank’s strategist team made its second upward revision in two months, citing strong corporate earnings and the accelerated monetization of AI investments. The latest target is around 3% higher than last Friday’s closing price, and slightly above the consensus forecast of 7,845 points from 20 strategists surveyed by Bloomberg.

The JPMorgan team pointed out that capital expenditure by hyperscale AI cloud providers is being monetized through customer demand. The accelerated growth and increased order backlog of cloud businesses at Alphabet, Amazon, and Microsoft should help ease market concerns about these companies’ return on capital. This signal is significant for investors evaluating the long-term value of AI investments.

The JPMorgan strategist team led by Dubravko Lakos-Bujas raised the S&P 500 year-end target from 7,800 to 8,000 points. Previously, in June, the team had raised its target from 7,600 to 7,800 points.

The core logic behind this upgrade lies in the AI monetization signals released during the second-quarter earnings season. The strategists stated that the order backlog in cloud businesses continues to increase, and as these backlogs gradually convert into recognized revenue, “cloud business growth should continue to gain strong support, thus helping to justify the increasing AI capital expenditure.” They also noted that key demand indicators for hyperscale cloud providers “remain elevated and continue to rise.”

Beyond the AI narrative, overall corporate earnings performance is also a key pillar for this upgrade. Earnings for S&P 500 component companies surged by 32%, marking one of the strongest recorded increases, with the index itself returning to historic highs.

On the capital expenditure front, JPMorgan estimates that total capital expenditure by S&P 500 companies will reach $1.5 trillion this year, with AI-related spending expected to account for over half, and this proportion is set to keep increasing. The strategists believe that as long as the commercial returns on AI spending continue to materialize, market concerns over cash flow pressure will gradually recede.

JPMorgan is not alone. Strategists from Citigroup, Deutsche Bank, and Goldman Sachs are also among the most bullish on US stocks this year. However, compared to the market’s average forecast of 7,845 points, JPMorgan’s 8,000-point target remains on the optimistic side of consensus.

The market average forecast implies a year-end gain of about 1%, while JPMorgan’s latest target suggests there’s about 3% upside remaining. The gap between the two reflects the market’s ongoing differences over the pace and sustainability of AI investment returns.