Goldman Says Buy, Hedge Funds Are Selling — Who’s Right on Tech Stocks?

TLDR

• Goldman Sachs raised its year-end S&P 500 target to 8,000, up from 7,600
• Q2 earnings season, starting mid-July, is seen as the key test for stocks
• AI capital spending is expected to drive roughly half of all S&P 500 earnings growth in 2026
• Hedge funds sold tech stocks at the fastest pace since 2016 during the week ended June 25
• The Magnificent Seven lost over $2.3 trillion in market value during June

Goldman Sachs raised its year-end S&P 500 target to 8,000 on May 26, up from a prior target of 7,600. The bank’s chief U.S. equity strategist Ben Snider laid out the case in a note published June 28.

The core of Goldman’s argument is straightforward. Stock market gains in 2026 have been driven almost entirely by earnings growth, not by investors paying higher prices for the same profits.

Snider called Q2 earnings season “a critical test.” If companies deliver, the rally has a reason to continue. If they miss, the market’s structure faces its most serious challenge of the year.

What Goldman Expects From Earnings

Goldman’s 2026 earnings-per-share forecast for the S&P 500 stands at $340, a 24% increase year over year. For 2027, it projects $385 per share, a further 13% rise.

FactSet estimates Q2 earnings growth at 22%, up from 18.7% at the start of the quarter. Revenue growth is expected at 12.1%, the strongest pace since Q2 2022.

Companies missing estimates are being punished hard. Misses sent stocks down an average of 4.2%, compared to a historical average of 2.9%.

The S&P 500 is currently trading near 7,365. Goldman’s 8,000 target implies about 9% more upside from here.

AI Spending Is Driving the Earnings Case

Goldman says AI infrastructure investment will account for roughly half of all S&P 500 earnings growth in 2026.

The largest tech companies are expected to spend around $754 billion on capital expenditure this year. That is an 83% increase from 2025. Goldman projects that number rising to $905 billion in 2027.

Goldman’s basket of stocks tied to AI data center construction has returned nearly 60% year-to-date. Semiconductors are the main direct beneficiaries, but hardware, industrials, and utilities are also seeing earnings boosts.

The S&P 500 is trading at roughly 21 times forward earnings, higher than about 87% of observations over the past 40 years. Goldman argues that near-record corporate profitability and relatively low interest rates justify that level.

The seven largest tech stocks — Nvidia, Apple, Alphabet, Microsoft, Amazon, Broadcom, and Meta — post a combined return on equity of 44%. Goldman estimates that figure will fall by an average of 700 basis points next year as depreciation rises at large tech companies.

Hedge Funds Are Cutting Tech Exposure Fast

At the same time Goldman is bullish on earnings, hedge funds are reducing their exposure to tech.

Goldman reported that during the week ended June 25, hedge funds sold technology stocks at the fastest pace since the bank began tracking the data in 2016.

The Magnificent Seven — Apple, Microsoft, Nvidia, Amazon, Alphabet, Meta, and Tesla — made up about 21.5% of hedge funds’ U.S. stock holdings at the start of 2026. That figure has now fallen to 14.5%, the biggest six-month drop since the 2022 bear market.

The group lost more than $2.3 trillion in market value during June alone.

Goldman’s base case remains that strong earnings, led by AI spending, will support stocks through year-end. Q2 reporting begins in mid-July, starting with major banks.

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