Goldman Sachs Sees S&P 500 at 8,700 Within a Year Even as Earnings Growth Slows

Including dividends, the target implies a total return of about 16%, the bank's strategists said in their 2027 outlook. They expect S&P 500 earnings to grow 11% in 2027, and see earnings growth slowing sharply in every major region after a year of strong, broad gains.

The call matters for AI investors because Goldman's case rests less on the AI spending boom continuing to accelerate than on stocks having already become cheaper. Peter Oppenheimer, the bank's chief global equity strategist, wrote that equities have "de-rated sharply" and are likely to keep rising "with high volatility". Goldman expects growth in AI capital expenditure to peak next year and borrowing costs to stay high, but it argues that more attractive valuations and lower bond yields should offset slower profit growth.

That view comes after a sell-off in large technology stocks following the US midterm elections. Goldman's preference is for long-duration growth companies, particularly the US hyperscalers, which it says should gain in value as overall growth slows. It also favours selected defensive sectors and areas that benefit from lower bond yields and oil prices.

On regions, Goldman is overweight the United States and Japan, neutral on Asia and emerging markets, and underweight Europe. Its 12-month targets are 700 for the STOXX 600, 4,500 for Japan's TOPIX and 1,850 for the MSCI Emerging Markets index. The bank expects the highest returns in Asia but said it puts more weight on risk-adjusted returns.

Oppenheimer said risks are "becoming more two-sided", naming bond markets, oil prices and shifts in AI spending as possible sources of volatility. Goldman had raised its year-end 2026 target for the S&P 500 to 8,000 in May on the strength of AI-driven earnings.

The outlook will face its first test within days. Nvidia, the largest single beneficiary of AI capital spending, reports quarterly results on Tuesday under an interim chief executive after Jensen Huang's resignation, and Anthropic is expected to price its IPO on Wednesday.