Goldman Sachs says fears of US earnings bubble are misplaced

Goldman Sachs would like everyone to calm down about corporate America’s profit surge. Ben Snider, the bank’s US equity strategist, released an analysis arguing that the S&P 500’s roughly 30% year-over-year profit growth in both Q1 and Q2 of 2026 reflects genuine economic strength rather than unsustainable over-earning. The numbers behind the confidence The S&P 500 posted cumulative earnings growth of 26% across the previous four quarters. AI-related capital expenditures contributed roughly 11 percentage points to earnings growth in 2026, making artificial intelligence the single largest engine behind the profit surge. Semiconductor companies are running gross margins around 70%, well above the 15-year average of 55%. Goldman forecasts AI capex contributions declining to 7 percentage points in 2027 and turning slightly negative in 2028. Semiconductor margins, if they revert toward that historical 55% average, could shave approximately 10% off S&P 500 earnings. Where Goldman sees the index heading Snider’s team projects S&P 500 earnings per share of $415 in 2027 and $460 in 2028, representing 11% growth in each year. The 12-month price target for the S&P 500 sits...