TLDR
- Wells Fargo raised its year-end S&P 500 target to 7,950, up from 7,300
- The bank now expects S&P 500 earnings per share to reach $340 in 2026, up from $315
- Easing geopolitical tensions following a U.S.-Iran deal helped reduce market uncertainty
- Wells Fargo’s chief equity strategist says the AI bull market is likely to continue
- Semiconductors and AI infrastructure remain the bank’s top sector picks
Wells Fargo raised its year-end 2026 target for the S&P 500 to 7,950, up from its previous target of 7,300. The new target implies about 5.2% upside from the index’s recent close of 7,554.29.
The bank cited stronger corporate earnings, easing geopolitical risks, and a recent market pullback that reset investor sentiment as key reasons for the upgrade.
Wells Fargo now expects S&P 500 earnings per share for 2026 to come in at $340, up from a prior estimate of $315. It also raised its 2027 EPS target to $390 from $365.
Separately, Wells Fargo Investment Institute raised its own year-end S&P 500 target range to 7,800–8,000, up from 7,400–7,600. It also set a 2027 target range of 8,600–8,800.
The S&P 500 is up 10.3% so far this year, driven largely by the AI-related rally and developments around the Iran conflict.
Sentiment Has Reset
Chief equity strategist Ohsung Kwon said in a CNBC interview that a recent mini sell-off helped reset investor sentiment to neutral levels. He said that creates room for further gains.
“The path of direction for the equity market is still higher,” Kwon said.
The bank pointed to falling oil prices, now around $70 per barrel, as a factor that should keep inflation in check over the next couple of months.
Kwon noted that recent Federal Reserve commentary was “more balanced than what the market perceived,” downplaying concerns about the central bank’s stance on rates.
Wells Fargo identified inflation as the biggest remaining risk to stocks, but only if the Fed were to react aggressively. The bank said a “run it hot” policy would actually be bullish for equities.
Lower oil prices and declining yields could benefit sectors beyond technology. However, Kwon acknowledged that the Fed’s net-hawkish stance presents a headwind for that broader market rotation.
AI and Semiconductors Remain the Focus
Despite the broader macro discussion, Wells Fargo kept its focus firmly on technology. Kwon said the AI bull market is likely to continue.
He pointed to heavy AI infrastructure investment from major tech companies, including Alphabet and Meta, as a tailwind for what he calls “CapEx takers” — semiconductors and AI infrastructure companies.
Kwon dismissed concerns about falling token prices, arguing that cheaper AI models could increase overall demand for computing power. “I think we’re still in the very early phase of the AI adoption,” he said.
During recent market volatility, semiconductors and AI infrastructure stocks rose while other sectors declined, a trend Wells Fargo views as a positive sign.
“I don’t see that much stress in the equity market right now,” Kwon said.
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