Two major Wall Street forecasters updated their S&P 500 targets on the same day. They cited the same reason. And neither of them lowered their number.
One of those calls is aggressive enough to catch the market’s attention. The other is even more aggressive. Here is what is driving both.
HSBC Global Investment Research raised its year-end 2026 target for the S&P 500 to 7,650 from 7,500 on May 11. The revision came alongside an 8% upgrade to the bank’s 2026 index earnings per share estimates, reflecting stronger-than-expected first-quarter results, Reuters confirmed.
HSBC now expects 2026 S&P 500 EPS growth of approximately 20%, or $325, with the Magnificent Seven megacap technology firms continuing to drive a large share of those gains.
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First-quarter S&P 500 earnings are on track to climb almost 29% year-over-year, with much of that fueled by AI-related heavyweights, according to LSEG I/B/E/S data cited by Reuters.
The path from 7,650 to 8,000 is also outlined in the note, but it carries conditions. HSBC said the index could surpass 8,000 if stronger tech valuations, potentially driven by high IPO valuations, coincide with a recovery in lagging sectors, wider AI-led earnings gains across industries, and a favorable economic backdrop.
The caution HSBC embedded alongside the S&P 500 upgrade
The upgrade is not without reservation. HSBC’s strategists included a direct caution alongside the higher target. “While earnings remain supportive, sentiment is on shakier ground,” they wrote, according to Reuters.
The bank also flagged the narrowness of the current rally as both a risk and an opportunity. Most S&P 500 stocks are still trading below their 52-week highs despite the index sitting at record levels.
That divergence suggests the headline number is being carried by a relatively small group of names, primarily AI-linked megacaps, while the broader market has not fully participated in the advance.
That concentration creates a specific vulnerability. If the leadership group stumbles, the index can fall faster than a more broadly supported rally would. But it also means that if participation broadens and more sectors join the advance, the index could move higher more quickly than expected.
Yardeni Research raised its S&P 500 target even further on the same day
HSBC was not alone in moving its target higher on May 11. Ed Yardeni of Yardeni Research raised his year-end S&P 500 target to 8,250 from 7,700, representing approximately 11.5% upside from Friday’s close, according to CNBC.
“I’ve been bullish, but not bullish enough,” Yardeni told CNBC’s Squawk Box. “The earnings estimates of analysts have been phenomenal. I’ve never seen anything like it.” He raised his 2026 and 2027 S&P 500 EPS estimates to $330 and $375, respectively, from $310 and $350, CNBC noted. Yardeni described the current environment as an “earnings-led meltup.”
The fact that two firms independently raised targets on the same day, citing the same driver, reinforces the consensus that has been building this earnings season.
Corporate profits, particularly from AI-exposed technology companies, have been coming in significantly ahead of expectations. That is the single most important variable keeping the bullish narrative intact.
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Why S&P 500 earnings growth is the central driver of both forecasts
The S&P 500’s advance this year has been driven by one dominant force: profit growth. Not multiple expansion. Not rate cuts. Not improved economic sentiment. Earnings, specifically from the megacap technology companies that carry the most index weight, have been the engine, and they have been running hotter than most forecasters anticipated.
HSBC’s upgrade reflects that reality. The bank raised its EPS estimate for the full year precisely because the first quarter delivered. If the second quarter and second half of 2026 continue at a similar pace, the 7,650 target may prove conservative by year-end, as HSBC’s own 8,000 scenario implies.
The risk in the other direction is equally clear. HSBC’s strategists flagged shakier sentiment as a counterweight. If investors begin to question whether the earnings growth rate can be sustained, valuations at current index levels leave limited margin for error.
A meaningful earnings miss from one or more of the Magnificent Seven could be enough to reset the narrative quickly.
Key figures from HSBC’s May 11 S&P 500 upgrade:
- New HSBC year-end 2026 S&P 500 target: 7,650, raised from 7,500
- EPS estimate revision: raised 8% for 2026; bank now forecasts 20% EPS growth, or $325 for the index
- Q1 S&P 500 earnings growth: on track for nearly 29% year-over-year, per LSEG I/B/E/S
- Path to 8,000: requires stronger tech valuations, recovery in lagging sectors, wider AI earnings gains, and a favorable economic backdrop
- HSBC caution: “While earnings remain supportive, sentiment is on shakier ground”
- Yardeni Research year-end target: raised to 8,250 from 7,700 on May 11; 2026 EPS estimate $330, 2027 estimate $375
- S&P 500 May 8 close: 7,398.93; most component stocks still below their 52-week highs despite the index at a record high.
Source: Reuters
What this means for investors watching the S&P 500
For investors, a target upgrade from HSBC is a signal, not a guarantee. Major bank forecasts can and do miss by wide margins, and year-end targets are best read as a statement of conviction about the direction of travel rather than a precise prediction.
What the HSBC note does usefully confirm is that the earnings-driven bull case remains intact as of mid-May 2026. The bank is not calling for a pullback or a shift in positioning. It is raising its assessment of where profits are heading and adjusting its index target accordingly. That is a meaningfully different message from a target raised purely on sentiment or momentum.
A broader takeaway from both HSBC and Yardeni moving on the same day is that earnings season has shifted the conversation. The debate is no longer whether the AI-driven profit growth is real.
The debate is now about how long it can last, how broadly it can spread beyond the Magnificent Seven, and whether a market trading at these levels has already priced in enough of the good news to make further gains harder to sustain.
