A renewed surge in enthusiasm for artificial intelligence will help drive US stocks to higher-than-expected levels this year, according to strategists at JPMorgan Chase & Co.
The team led by Dubravko Lakos-Bujas has raised its year-end target for the S&P 500 to 7,600 points, after a downgrade to 7,200 points made just last month. The US benchmark closed at 7,109 points on Monday, implying further gains of about 7%.
The strategists’ bullish call is due to a stronger outlook for technology and AI, as they expect the sector to boost corporate earnings and offset lingering concerns around the Iran war.
The team’s rapid reversal of the March downgrade, where they cited geopolitical risks, underscores the difficulties faced by market forecasters in Donald Trump‘s second term, which has been marked by volatile episodes like conflict, tariffs and his pursuit of Greenland.
Early prints from the first-quarter earnings season appear to be helping. The period is shaping up to be stronger when compared with the fourth quarter, where investors had grown AI-fatigued and weary of high levels of capital expenditure, the strategists wrote in a research note.
A key catalyst has been Anthropic PBC’s restricted release of its new Mythos model, the team said, which has spurred optimism around the rapid progress of AI models and services. Some 66% of S&P 500 AI names have outperformed since the April 7 announcement, the strategists noted.
“In a world where corporates and governments across the world are racing to invest in AI in search of productivity gains and out of fear of becoming obsolete, we believe the Quality Growth theme will remain rich and crowded,” the strategists wrote.
The main US benchmark has surged to new all-time highs recently as peacemaking efforts and the ceasefire in the Middle East fuel a global risk-on rally.
Still, the JPMorgan team cautioned that ongoing geopolitical jitters could send equities falling in the short term, caveating the potential for renewed escalation appeared limited, with China likely serving as a stabilizing guardrail. A swift resolution to the conflict, meanwhile, could send the S&P 500 to multiples seen before the war, pushing it to about 8,000 points, they said.
Written by: Levin Stamm @Bloomberg
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