Goldman Sachs said stronger corporate earnings and improving profit expectations are continuing to push the S&P 500 toward fresh record highs, with the benchmark index up 8% year-to-date through Monday.
Companies in the index delivered first-quarter earnings-per-share growth of 17% year-over-year, excluding certain non-recurring items.
At the same time, forward 12-month EPS forecasts have climbed 13%, while valuation multiples have eased modestly, with the market’s price-to-earnings ratio down 4%.
Investment Spending Outpaces Buybacks
The bank pointed to a notable shift in how corporations are deploying capital.
Capital expenditures among S&P 500 companies jumped 38% from a year earlier during the first quarter, far exceeding the 1% growth recorded in share repurchases.
Goldman expects the gap to widen further into 2026, projecting capex to rise 33% to around $2 trillion, compared with a 3% increase in buybacks to roughly $1 trillion.
AI Companies Continue Driving Spending Boom
Major AI infrastructure companies remain at the center of the spending surge.
Goldman forecasts AI hyperscalers will collectively spend approximately $755 billion in 2026 as demand for artificial intelligence infrastructure continues to expand.
The broader increase in investment activity is also spreading across multiple sectors beyond technology.
Market Rewards Companies Focused on Expansion
According to Goldman, investors have increasingly favored companies investing aggressively in future growth opportunities over firms primarily emphasizing shareholder cash returns.
This preference has been especially strong among AI-linked businesses.
The bank also noted that uncertainty tied to the ongoing conflict and shifting Federal Reserve expectations has helped revive investor appetite for higher-quality companies after much of 2025 saw rotation away from the segment.
Strong Balance Sheets Still Viewed Favorably
Goldman Sachs said companies positioned to benefit from long-term structural growth trends are likely to continue attracting investor support, although geopolitical developments and AI market dynamics could affect how current investments are valued.
The bank added that companies with strong balance sheets and consistent shareholder return strategies should continue to command premium valuations.
Limited buyback growth could also increase the scarcity value of companies actively returning capital to investors, while elevated borrowing costs may further reward financially stronger businesses.
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