The S&P 500 has hovered between the 7,600 and 7,800 range of late, holding near record territory after surging 13% in 2026.
Yet the road has become much bumpier, with the index gaining less than 3% over three months, Yahoo Finance noted. It is struggling to build the same momentum as last year.
Given that sluggishness, Bank of America strategist Savita Subramanian is doubling down on what is Wall Street’s lowest year-end target, despite receiving more pushback on the call than she has in years.
Her refusal to budge looks increasingly lonely. Rival banks have raised forecasts as corporate earnings shot up and AI spending continued to support the market.
However, Subramanian isn’t simply betting on a recession or declaring the AI boom finished. Her unchanged 7,100 target is rooted in a risk hidden beneath the AI boom, one she feels investors are overlooking as the index hovers around record highs.
It’s also why she’s resisted following the Wall Street herd, even as pressure grows to abandon her bearish take.
BofA takes heat over Wall Street’s lowest S&P 500 target
As reported by FAMag, Subramanian is refusing to move BofA’s 7,100 S&P 500 target, even as it sits comfortably below the market and every forecast in Bloomberg’s survey of more than 20 strategists.
That Bloomberg figure shows an average of 7,901 for the year-end targets submitted by strategists in that survey, showing how isolated BofA’s target has become. At Thursday, Aug. 27’s close of 7,730.99, the average implies modest upside, but Subramanian’s call points to an 8.2% retreat.
Her stance is attracting unusual pressure, and she remarks that she’s getting a lot more “flak” than in years, with clients asking if she plans to lift that number.
Interestingly, when the bank introduced its 7,100 target late last year, it represented a relatively strong 4% to 5% appreciation in value. The market subsequently zoomed past it, transforming it into Wall Street’s starkest downside call.
BofA sees an AI credit risk hiding beneath the rally
Subramanian’s concern primarily centers on the financial structure that’s supporting the AI boom, which is changing quicker than investors might appreciate.
Hyperscalers once looked to finance expansion from operating cash flows. However, the sheer scale of the relentless AI arms race is compelling heavier borrowing.
AI-related hyperscaler bond issuance has skyrocketed to a whopping $220 million through Aug. 10, as opposed to $12.5 billion during the same period last year, Reuters reported.
Technology spreads reached a worrying 89 basis points, nine points wider compared to the broader investment-grade market, according to The Economic Times, with investors demanding more compensation in absorbing the supply.
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Higher spending can in turn create a loop.
AI investment effectively absorbs cash, free cash flow and share repurchases weaken, companies issue more debt, and financing costs rise. Even if we see profits continue to grow, investors might respond by assigning lower valuation multiples to index leaders.
Moreover, unlike other banks, BofA is questioning the quality and durability of earnings. The bank bumped its 2026 S&P 500 earnings forecast from $335 to $345 in July. Yet according to BigGo Finance, Q2 aggregate earnings growth of 52% dropped to 33% after excluding sizeable mark-to-market gains at Alphabet (GOOGL) and Amazon (AMZN).
Additionally, AI-infrastructure companies generated nearly one-third of the quarter’s index-level EPS growth. So in essence, Subramanian’s 7,100 forecast is a valuation compression.
In addition, hyperscaler capital spending can consume roughly 100% of operating cash flow by the end of the year, compared with 40% in 2023. Meanwhile, sluggish buybacks and greater debt issuance are reducing another source of market support.
The market’s behavior on Aug. 27 captured the tension.
Nvidia (NVDA) jumped 8.7% after posting robust earnings, lifting the capitalization-weighted S&P 500 by 0.7%, as Yahoo Finance confirmed. Meanwhile, the equal-weight S&P 500 ETF fell 0.3%. So selected stocks could prosper, even if the headline index struggles.
Wall Street’s bullish target reset puts BofA on the defensive
Subramanian’s 7,100 target is backed by evidence, but there are also plenty of reasons the market could move in the opposite direction.
Adjusted Q2 S&P 500 earnings grew at 33.5%, Reuters indicated, the quickest pace since 2021, while JPMorgan said that 85.1% of reporting companies blew past market expectations.
Cloud growth, growing backlogs, and improving cash-flow visibility offered evidence that AI spending is beginning to generate revenue. Nvidia reinforced that argument by forecasting approximately 70% sales growth next year.
Such results have prompted banks to move higher with their targets.
Reuters reported that JPMorgan bumped its target from 7,800 to 8,000 while lifting its 2026 EPS forecast to $365, suggesting that cloud backlogs continue to validate hyperscaler investment.
Reuters also noted that UBS Wealth Management raised its target from 7,900 to 8,100 while bumping its 2026 earnings estimate to $350 and its 2027 forecast to $400.
On top of that, Goldman Sachs and Morgan Stanley see 8,000, while Citigroup and Oppenheimer target 8,100. At the same time, Yahoo Finance reported that Yardeni Research is among the more aggressive of the lot at 8,400.
That 1,300-point discrepancy between BofA and Yardeni represents around 17% of the S&P 500’s current level. This points to fundamentally different conclusions about whether AI investment could produce sufficient earnings to offset higher borrowing costs while lowering pricing multiples.
Subramanian acknowledges that today’s borrowers have healthier businesses and balance sheets compared to dot-com-era companies. However, she also believes that although compute demand remains remarkably strong, broader evidence of “real monetization” is needed before embracing the index.
“We see opportunity in S&P 500 stocks, but not the overall cap-weighted index,” Subramanian told Bloomberg.
Timing has also weakened her position.
Yahoo Finance reported that BofA told investors to “take profits” back in June when the S&P 500 was near the 7,406 level. The index is around 4.4% higher. An independent tracker also found that the benchmark finished above her final target in 12 of 14 completed years, though year-end forecasts are typically imprecise.
For investors, it’s all about identifying the dominant theme.
If we see continued cloud growth, backlog conversion, and resilient free cash flow, we’d likely see a move toward the bullish targets and broad index exposure.
Growing debt and weaker buybacks, along with widening credit spreads, will strengthen BofA’s case and favor cash-generative value stocks. At the same time, energy and financials become particularly important in that scenario.
Related: Morgan Stanley sees big change coming for Alphabet stock
