New York [US], May 27, (ANI): Goldman Sachs projected a robust outlook for the S&P 500 as it raised the forecast for the index to 8,000 from 7,600 by year's end on the back of continued strength in corporate earnings, a Reuters report said.

Both the S&P 500 and the Nasdaq hit record highs on Tuesday after investors bought into the massive AI investments by tech giants. The robust AI demand is fuelling a continued rally even as mixed signals continue to emerge from the Middle East conflict.

'Earnings growth has powered the entire S&P 500 return so far this year, and we expect this dynamic to continue in the coming months,' the Reuters report quoted from the Goldman Sachs note.

The brokerage has raised the earnings-per-share target to $340 for 2026 and to $385 for 2027, according to the note.

Brokerages have been bullish on the AI-driven rally on the Street and have given calls that reflected growing optimism around corporate earnings despite a shaky ceasefire in the Middle East and no certainty around a durable peace agreement. The continued closure of the critical Strait of Hormuz has made everyone cautious about the future of oil. Energy price pressures have started to weigh on the US consumers, who are holding back on spending, trying to gauge the unfolding situation.

The bullish sentiment comes at a moment when inflation fears are rising as oil gets buffeted by strong headwinds from an unstable Middle East.

The consumer sentiment in May tumbled to a record low as US households grapple with rising energy prices and the spectre of an interest rate hike by the US Federal Reserve. Kevin Warsh, the new Fed chair, took over last week on Friday and is expected to take a closer look at the evolving situation with his emphasis on reforms and US President Trump's focus on slashing rates. Trump said that Warsh will have the full support of his administration.

The brokerage sees the falling consumer spending and elevated costs as challenges but feels that the higher AI investments will offset these pressures.

Semiconductor stocks have seen a dizzying rally as the AI frenzy takes over Wall Street. American chip giant Micron Technologies surged 19% on Tuesday, entering the $1 trillion market valuation club. (ANI)