Evercore ISI strategists are bullish on the S&P 500, forecasting it will reach 7,750 points by the end of 2026, driven by the transformative impact of artificial intelligence (AI).

They have increased their 2025 earnings estimate for the index to $264 per share and project $287 for 2026, citing stronger-than-expected Q2 results, easing trade uncertainties, and early AI adoption boosting productivity.

The forecast is based on the belief that AI is revolutionizing corporate earnings and valuations, contributing to the nearly 10% rally in 2025 and recent record highs.

While noting similarities to the 1990s tech-led bull market, Evercore emphasizes that the current rally is more broad-based across sectors, supported by rapid rebounds and Federal Reserve interest rate cuts.

Investors are currently awaiting economic data and Federal Reserve comments, as markets were closed for a holiday, to better gauge future monetary policy.

The firm recommends investing in 'AI enablers, adopters, and adapters' across sectors like communication services, consumer discretionary, and information technology, which are poised to benefit most from AI integration.

The technological revolution driven by AI is expected to significantly boost stock prices, earnings, and societal progress, with the market rally approaching nearly 10% in 2025.

The year has seen a nearly 10% rally, fueled by positive earnings surprises, anticipation of interest rate cuts, and AI's role in enhancing operational efficiencies across industries.

AI's influence is considered to surpass that of the internet, with rapid societal and industrial adoption over three years supporting strong corporate earnings growth and market resilience.

Strategists compare AI's impact to the internet's, expecting its effects to grow as adoption accelerates, touching all parts of society and industry.

The US stock market has been on a four-month rally, reaching new records, driven by strong corporate earnings and optimism about potential interest rate cuts, especially in tech giants like Nvidia, Meta, and Microsoft, which have gained at least 20%.

Evercore presents two scenarios: a bullish case where the S&P could reach 9,000 points if confidence in AI turns into a bubble, and a bearish case where it could fall to 5,000 amid high inflation and slow growth.

Near-term, the firm revised its 2023 year-end target for the S&P 500 down to 6,250 from 6,460 but raised its outlook for 2025, reflecting optimism about AI’s long-term impact despite macroeconomic uncertainties.