JPMorgan’s head of global markets strategy Dubravko Lakos-Bujas published the bank’s mid-year outlook on June 24 with an admission buried near the top.
The firm had been “much too cautious” on earnings coming into 2026. The scale of upward revisions the market delivered, he wrote, has no modern precedent outside of post-recession or post-shock environments.
The note raised the bank’s S&P 500 target. It also came with a warning on AI stock positioning that the headline number tends to overshadow.
JPMorgan raises S&P 500 year-end target to 7,800 and lifts EPS forecasts
JPMorgan raised its year-end S&P 500 target to 7,800 from 7,600, Investing.com reported. The index’s most recent close near 7,365 implies roughly 6% upside to the new target. The bank also lifted its 2026 S&P 500 earnings-per-share estimate to $350, representing 29% year-over-year growth, and set a 2027 EPS target of $390.
The 2027 figure sits below market consensus. JPMorgan is more cautious on the outer year than most of its peers, reflecting concern that AI pricing power may diminish as competition in the sector increases and the initial wave of hyperscaler capex spending begins to moderate.
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The bank’s 2027 EPS forecast of $390 implies it sees the earnings growth rate decelerating from 29% in 2026 to roughly 11% in 2027.
At least seven research firms raised their S&P 500 year-end targets this month, according to Investing.com. Barclays raised its target to 7,800 earlier this week, matching JPMorgan’s new number.
The S&P 500 is up roughly 7.6% year to date and has gained 16% from its March 30 lows. The technology sector leads with a 27% gain so far this year, Yahoo Finance noted.
Why JPMorgan called AI earnings upgrade cycle “unprecedented”
The central argument in JPMorgan’s mid-year note is that the AI investment boom has generated earnings revisions at a pace without modern precedent. Consensus earnings forecasts for 2026 and 2027 have risen about 10% this year.
AI-related capital expenditure budgets among technology hyperscalers have nearly doubled over the same period.
First-quarter 2026 earnings grew 28.4% year over year, with the information technology sector growing roughly 60% on its own, according to FactSet data.
Lakos-Bujas said the bank’s biggest midyear regret was not being bullish enough on the earnings outlook from the start. JPMorgan had raised its target to 7,600 in April, citing early signs of earnings momentum. The revision cycle kept running well past what the bank expected when it made that call.
JPMorgan’s own credit card spending data shows households are still buying. But management commentary from companies across industries describes a shopper who has become more selective and price-conscious than a year ago.
Consumers are spending, just more carefully than the headline numbers suggest.
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The U.S.-Iran peace deal and JPMorgan’s S&P 500 blue sky scenario
Progress toward a U.S.-Iran peace deal is the second driver in JPMorgan’s note. The bank has a “blue sky” scenario in which geopolitical risk clears fully and the S&P 500 valuation multiple expands to 23 times earnings, putting the index near 8,000. Lakos-Bujas said that scenario is “increasingly plausible.”
The 7,800 base case bakes in a valuation multiple of roughly 22 times 2026 earnings. JPMorgan’s strategists said “the path upwards will be non-linear, as the market will need to clear various hurdles.”
Two consecutive strong earnings seasons have raised the bar heading into Q2 reporting. Beating estimates on both earnings and capital spending will be harder than it was in Q1.
JPMorgan’s flash crash warning on crowded AI stock trades
The part of the note that deserves equal attention to the target upgrade is the flash crash warning. Speculative momentum trading in secondary and tertiary AI stocks has reached “extreme crowding levels,” according to JPMorgan, Yahoo Finance reported. The bank said the market faces a high probability of a flash crash in those names if momentum reverses.
More equity issuance is coming, adding to the amount of stock the market has to absorb. JPMorgan also expects the Fed to hold rates through 2026, with hikes a possibility in 2027. More stock supply and higher rates are the two conditions that push valuation multiples lower, and JPMorgan is flagging both as risks to the rally’s current pace.
JPMorgan’s preferred positioning reflects all of this. The bank recommends a barbell: quality growth and direct AI infrastructure plays on one side, low-volatility defensive names on the other.
It is constructive on technology, AI-adjacent utilities and industrials, defense, banks, and select health care. Consumer names could outperform if the Iran peace process holds and energy costs stay lower.
The target has moved from 7,200 in March to 7,600 in April to 7,800 in June. Lakos-Bujas said the bank underestimated earnings at each point along the way. The flash crash warning in the same note is the reminder that getting the direction right and managing the path to get there are two different problems.
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