The S&P 500 Has Only Grown Earnings This Fast Twice Before. History Says This Is What Happens Next
Investors are wondering what stage of the AI boom we're at. The dot-com era offers some clues.
In 2026, the S&P 500 is set to make history with its unprecedented earnings growth. Analysts predict that the index's earnings per share will surge by 24%-32% this year, propelled by the AI boom and the Magnificent Seven's dominance. The Magnificent Seven, comprising tech giants like Nvidia, Amazon, Alphabet, and others, now constitute about a third of the index.
Leading the charge are Nvidia and Amazon, with the former expected to witness a 95% year-over-year EPS growth and the latter a staggering 79% growth. Alphabet is also set to see a significant 90% increase in GAAP earnings. Historically, such a rapid earnings growth rate is rare, with only two instances in the modern era when the S&P 500 witnessed a 25% earnings growth in a single year, excluding post-recession rebounds.
This surge in earnings growth presents a compelling narrative about the current state of the market and what it might imply for the future.
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