S&P 500 Gains 10% as AI-Fueled Earnings Outrun Valuation Concerns
Updated
Updated · Financial Times · Jun 9
S&P 500 Gains 10% as AI-Fueled Earnings Outrun Valuation Concerns
3 articles · Updated · Financial Times · Jun 9
Summary
S&P 500 companies posted 18% year-on-year first-quarter earnings growth, and the index is up about 10% this year despite a recent 5% Nasdaq-100 drop.
Forward earnings estimates have risen even faster than share prices—up 15% year-to-date—pulling the market’s forward P/E down to 21 from 22 at the start of the year.
AI infrastructure spending is the main driver: analysts expect Alphabet, Amazon, Meta, Microsoft and Oracle to spend $755 billion on capex this year, up 83% from 2025.
That build-out should generate roughly half of S&P 500 earnings growth this year and next, while semiconductor and other AI supply-chain stocks have rallied 33% alongside a 30% rise in earnings estimates.
Risks remain elevated, with the top 10 companies making up 41% of S&P 500 market value, oil-shock pressure from the Strait of Hormuz and a coming IPO wave threatening more volatility.
As AI spending soars, will future profits ever justify the massive investment, or is a correction inevitable?
Are a handful of AI giants masking underlying weaknesses in the broader US economy?
S&P 500’s AI-Driven Rally in 2026: Unprecedented Gains, Market Concentration, and Sustainability Risks
Overview
In 2026, the S&P 500 delivered strong performance, highlighted by an 8-week winning streak and robust market momentum. This rally was driven by a combination of strong liquidity, positive earnings, and favorable investor positioning. At the heart of this surge was Artificial Intelligence, which played a central role in fueling exceptional gains across the technology sector. Large-cap technology companies and specialized semiconductor firms led the charge, with the Nasdaq also experiencing a notable surge. Together, these factors created a powerful, AI-driven rally that set the tone for the market’s upward trajectory.