UBS Predicts S&P 500 Could Hit 7,500 by End of 2026 Thanks to AI Boom
Wall Street is betting big on AI, and UBS just joined the chorus with a bold prediction. The Swiss bank raised its forecast for the S&P 500 to 7,500 by the end of 2026, pointing to strong corporate profits and continued gains in the technology sector.
UBS projects S&P 500 earnings growth of 14.4% year-over-year in 2026, with about half of that growth coming from technology companies. The so-called “Magnificent Seven” tech giants—leaders in AI, cloud computing, and software—are expected to keep driving the market forward, even as other sectors begin to catch up.
AI Momentum Still Dominates the Market
UBS describes the current market as still driven by AI momentum, but with signs that growth is starting to broaden beyond the largest tech companies. This is crucial for a sustainable bull market, as it spreads profits across industries rather than concentrating them in just a few stocks.
The bank expects capital expenditures to eventually expand beyond tech, boosting broader economic growth. A soft patch is expected in the next four to five months due to tariffs affecting prices, but UBS forecasts a strong rebound as global growth accelerates, consumer confidence rises, and interest rates decline.
AI Spending Keeps the U.S. Economy Strong
According to UBS, U.S. economic growth is now heavily tied to AI investments, particularly in technology and data infrastructure. Analysts estimate that capital spending related to AI contributed 78 basis points to GDP growth in the first half of 2025, or around 1.4 percentage points when including software and R&D.
UBS called these figures “eye-watering,” comparing the current AI investment surge to the technology build-out of the late 1990s. Back then, heavy investment in computers, software, and internet infrastructure fueled a decade-long boom in productivity and corporate profits.
Wall Street Debates: Boom or Bubble?
The rapid AI-driven rally has sparked debate over whether the market is entering a bubble. Stocks are currently trading at roughly 22 times forward earnings, well above their five-year average. Many investors worry that much of the positive news may already be priced in.
UBS, however, takes a measured view. The bank suggests that a dramatic bubble bursting is not inevitable. Instead, the market could see strong gains in 2026, followed by a potential plateau in 2027. The key factor, UBS notes, will be how AI-driven productivity spreads to companies outside the tech sector.
Corporate Profits Are the Real Driver
UBS emphasizes that earnings growth—not higher valuations—will fuel the next leg of the stock market rally. While stock prices are elevated, the firm believes that continued profit growth driven by AI and broader productivity gains will keep equities rising.
In other words, as long as companies continue turning AI investments into real profits, the market could keep climbing. Valuations may not expand much further, but earnings growth can sustain a strong upward trajectory for the S&P 500.
What This Means for Investors
The UBS forecast highlights AI as a central force in the market for the next several years. Technology companies are likely to continue leading, but the broader economy may start benefiting as AI spreads to sectors like manufacturing, healthcare, finance, and logistics.
For investors, this suggests a market where profits matter more than hype. Watching which companies successfully implement AI could determine who benefits the most in the next phase of the bull market.
UBS sees 2026 as a year of strong growth, with potential soft patches along the way, but overall optimism driven by AI and strong corporate earnings remains high.