JPMorgan has raised its outlook for U.S. stocks for the second time. Why isn't it concerned about spending on AI?

Strategists at JPMorgan Chase have raised their forecast for the S&P 500 index for the second time in two months, citing strong corporate earnings and returns from large-scale investments in artificial intelligence, according to Bloomberg.

Analysts led by Dubravko Lakos-Bujas now expect the U.S. benchmark to rise to 8,000 points. That is about 3% higher than its closing level on August 7.

In June, JPMorgan strategists revised their forecast from 7,600 to 7,800 points. But by early August, the S&P 500 index had already approached that level amid a 32% surge in corporate earnings—one of the best performances on record, according to Bloomberg.

The second-quarter earnings season provided evidence that the capital expenditures of so-called AI hyperscalers are being monetized through customer demand, JPMorgan strategists said. They cited strong growth in cloud services and an increase in backlogs at Alphabet (Google’s parent company), Amazon, and Microsoft, which should alleviate investors’ concerns about the return on capital invested.

“As large order backlogs are converted into actual revenue, the cloud segment will continue to grow steadily, which will help justify large-scale investments in artificial intelligence. Demand among hyperscalers remains high and continues to grow,” they noted.

JPMorgan strategists forecast a further increase in AI investment: According to their estimates, this technology will account for more than half of the total capital expenditures of S&P 500 companies—amounting to $1.5 trillion this year—and this share will continue to grow.

Analysts at banks such as Citigroup, Deutsche Bank, and Goldman Sachs also hold some of the most optimistic views on U.S. stocks this year. On average, experts expect the S&P 500 to rise to 7,845 points by the end of the year, which is about 1% above current levels.

This article was AI-translated and verified by a human editor