Goldman: AI spending lifts markets

Goldman Sachs says the latest stock rally is being carried by artificial intelligence spending, not just relief from geopolitics. (goldmansachs.com) In a report published April 29, Goldman said the S&P 500 has climbed about 13% since March 30, its sharpest rally since April 2020. The bank kept a 2026 year-end target of 7,600 for the index, or about 6% above April 24 levels. (goldmansachs.com) Goldman said AI investment should drive roughly 40% of S&P 500 earnings growth this year. It said the largest cloud computing companies are planning an estimated $670 billion of spending in 2026. (goldmansachs.com) That spending is mostly money for data centers, chips, networking gear and power needed to run AI systems at scale. In market terms, it has turned a technology buildout into an earnings story for semiconductor, cloud and equipment suppliers. (goldmansachs.com 1) (goldmansachs.com 2) Goldman has also been warning that investors are no longer rewarding every AI spender the same way. Its December research note said Wall Street’s consensus for 2026 hyperscaler capex had already risen to $527 billion from $465 billion, but stock performance had started to diverge based on whether investors could see a path from spending to revenue. (goldmansachs.com) That test arrived on April 29, when Microsoft, Alphabet, Amazon and Meta Platforms were all due to report after the close. Reuters said those four companies alone are expected to spend more than $600 billion this year on AI infrastructure and together account for more than $10 trillion in market value and 17% of the S&P 500. (usnews.com) The debate is no longer whether AI capex is large. It is whether cloud growth, advertising sales and software demand can convert that capex into cash flow fast enough for investors who have already pushed index valuations back near record territory. (usnews.com) (goldmansachs.com) Oil is part of the backdrop, but not the main driver of this call. Goldman said recent earnings estimates have held up partly because the S&P 500 has limited oil sensitivity, even as the International Energy Agency warned this month that the Middle East war had caused the largest oil-supply disruption in history. (goldmansachs.com) (iea.org) For now, Goldman’s message is simple: the market is still paying for AI growth, but it is asking harder questions about who gets paid back. (goldmansachs.com)