AI Euphoria to Fuel 20% S&P Rally by End-2026, Evercore ISI Says

S&P 500 (SPX) market information on the floor at the New York Stock Exchange (NYSE), on Aug. 25.

(Bloomberg) -- US stocks can rise another 20% by the end of 2026, driven by the excitement around artificial intelligence, according to strategists at Evercore ISI.

Most Read from Bloomberg

Sydney’s New Airport Will Take Travelers Into the Wild Amtrak Debuts New High-Speed Acela Trains After Years of Delays Trump Signs Order to ‘Make Federal Architecture Beautiful Again’ NY Penn Station’s Long-Awaited Revamp to Start Work in 2027 Parents Mobilize to Protect School Commutes Amid Trump Deployment in DC

The S&P 500 is forecast to reach 7,750 points by the end of next year, with “a technological revolution lifting stocks, multiples and society to new heights,” Evercore ISI chief equity and quantitative strategist Julian Emanuel wrote in a note. That implies a 20% gain from Friday’s close, and would follow an almost 10% rally for the US benchmark so far this year.

Emanuel’s 2026 target is the highest on the Street so far, according to data compiled by Bloomberg. The strategists wrote that the impact of AI means earnings have been defying expectations. The second quarter delivered “double-digit growth and broad upside surprises despite tariff/policy uncertainty,” they wrote.

US stocks have gained for four straight months, hitting fresh records multiple times, on optimism around robust corporate earnings and potential interest rate cuts. The rally has been driven by the tech sector, with the likes of Nvidia Corp., Meta Platforms Inc. and Microsoft Corp. all up at least 20% this year.

The Evercore ISI strategists acknowledged a wide range of outcomes for next year. Their bull case would see the index reaching 9,000 points if animal spirits take hold in consumer, business and investor confidence, while a bear case envisages the gauge dropping to 5,000 points if inflation stays high and economic growth is subdued.

Read: Stock Market’s Fate Comes Down to Next 14 Trading Sessions

Emanuel also raised his target for 2025, and now expects the benchmark to end this year at 6,250 points — below than Friday’s closing level of 6,460, and slightly lower than the average 6,370 target among strategists tracked by Bloomberg. US markets are closed for a public holiday on Monday.

“AI is ‘bigger’ than the Internet,” the strategists wrote. “In three years, its effect has touched all parts of society and industry even as adoption only begins to inflect.”

--With assistance from Subrat Patnaik.

Most Read from Bloomberg Businessweek

Monchhichi Makes a Comeback Amid Labubu Craze Young European Backpackers Are Being Lured to Australia for Mining Jobs How Bombas Built a Fancy Socks Empire With $500 Million in Sales As Bushmeat Consumption Grows, Nigerian Doctors Fear Outbreaks So Why Is an Independent Fed Such a Big Deal?

©2025 Bloomberg L.P.

View Comments