Swiss investment bank UBS has raised its year-end target for the S&P 500, the benchmark index for the New York stock market, to 8,100. The upward revision reflects an optimistic outlook that earnings improvement led by semiconductors will drive the stock market through the remainder of the second half.

In an analyst note released on the 21st (local time), UBS market strategist Keith Parker lifted the S&P 500 year-end forecast to 8,100 from the previous 7,900. This implies roughly 8.8% additional upside from the prior day’s close of 7,443.28. Parker also significantly raised the S&P 500 target for next year to 8,900 from 8,200, projecting that the bull market will extend into the following year.

This marks UBS’s fourth target adjustment this year alone. In April, the bank lowered its target from 7,700 to 7,500 as the outbreak of war with Iran triggered a surge in oil prices and reignited inflation concerns, raising the likelihood of Federal Reserve interest rate hikes. Just a month later, on May 22, UBS raised the target back to 7,900. Now, less than a week after reaffirming the 7,900 target on the 15th of this month despite market uncertainties, the bank has moved to raise it again.

Strategist Parker emphasized that tech-led earnings growth is providing significantly greater upside potential as the artificial intelligence upcycle enters its second year, with signs of capital expenditure and demand spreading beyond the technology sector.

“Show Me the Money” — The AI Rally Faces an Earnings Verification Phase

Unlike the early days of the AI boom, the market is now demanding concrete results from companies. The landscape has shifted to one where firms must prove tangible profits relative to massive investments. If net income falls short of market expectations, forward guidance misses estimates, or even the slightest signal of slowing corporate spending momentum emerges, investors are quick to sell without hesitation.

Despite this, UBS remains unwavering in its optimism about corporate earnings. On the 15th, UBS raised its S&P 500 earnings per share (EPS) estimate for this year by roughly 8% to $335 from the previous $310. This reflects an expectation that the annual growth rate will approach 20%, far exceeding the initial estimate of 11%.

Semiconductors sit at the heart of the earnings improvement. UBS estimates that nearly half of the $25 EPS increase — approximately $11 — will come from the semiconductor sector. The energy sector is expected to contribute around $6, while other industrial segments will add roughly $8 to EPS growth.

Strategist Parker noted that while the market is currently pricing in sluggish growth, lower margins, and elevated interest rates, actual earnings revisions, profitability, and long-term growth expectations continue to rise. “Downside risks from geopolitical tensions, interest rates, and numerous AI-related issues still exist, but over the next several months to a year, the equity market will exhibit attractive asymmetry,” he assessed.

AI Capex Projected to Approach $1 Trillion Next Year

UBS forecasts that AI-related capital expenditure will surge 68% year-over-year to approximately $820 billion (about 1,212 trillion won) this year, and grow another 21% next year to approach $1 trillion (about 1,478 trillion won). Given tight semiconductor supply chains, rising chip leasing costs, and the ongoing need for capacity expansion, the bank sees virtually no likelihood of a near-term pullback in capital spending.

UBS projects that S&P 500 EPS will reach $375 next year, a 12% increase from this year. Strategist Parker added that strengthening earnings will lower the overall equity market’s valuation multiple, and with multiples already down 10% from the start of the year, the trend of stocks trading below fair value is expected to continue.

Meanwhile, UBS’s 8,100 target is a notably aggressive figure among Wall Street strategists. According to CNBC’s 2026 market strategist survey, the highest year-end target on Wall Street currently stands at 8,150, set by Oppenheimer, with UBS now close behind. The average year-end forecast among Wall Street strategists sits around 7,850.