Wall Street’s bull case on stocks just got another major vote of confidence.
RBC Capital Markets bumped its 12-month target for the S&P 500 to 7,900 from 7,750, as stocks continue to notch fresh highs, according to TheFly.
The firm joins a growing list of Wall Street outlets convinced that the stock market rally is being supported by strong corporate earnings.
For perspective, I covered Morgan Stanley’s Michael Wilson, who is echoing a similar view.
Wilson also argued that strong corporate earnings remain a key driver of the ongoing stock market rally and that pullbacks will likely remain shallow.
On top of that, Goldman Sachs analysts also noted that continued earnings strength is a robust support for stocks.
RBC analysts feel that the incredible excitement over AI, Fed cuts, and the Magnificent Seven tech stocks is secondary to earnings strength at this point.
The reset comes after the S&P 500 has jumped over 16% from its March 30 low, a rally that would typically invite a more defensive response.
Additionally, the firm also argued that the economy is operating at two different speeds.
Some businesses continue struggling with inflationary pressures, geopolitical hiccups, and broader economic uncertainty.
On the flip side, others are benefiting from healthier demand linked to AI infrastructure and tech spending.
S&P 500 price-index checkpoints through the latest close
- 2020: The S&P 500 closed at 3,756.07, up 16.3% year over year.
- 2021: The S&P 500 closed at 4,766.18, up 26.9% year over year.
- 2022: The S&P 500 closed at 3,839.50, down 19.4% year over year.
- 2023: The S&P 500 closed at 4,769.83, up 24.2% year over year.
- 2024: The S&P 500 closed at 5,881.63, up 23.3% year over year.
- 2025: The S&P 500 closed at 6,845.50, up 16.4% year over year.
- As of May 8, 2026, close of 7,398.93, the S&P 500 was up 8.1% year to date and up 10.0% over six months, using the Nov. 7, 2025, close of 6,728.80.
Source: FRED/S&P Dow Jones Indices.
RBC sees AI creating a two-speed stock market
One of the most obvious criticisms of the current stock market rally has been that it’s too narrow.
Tech stocks, chip companies, and AI infrastructure names did most of the heavy lifting, leaving investors questioning the broader market’s strength.
More Wall Street
Analysts at RBC Capital Markets, though, see things a lot differently.
RBC believes the market is evolving into a “two-speed” economy, where AI companies continue to deliver strong earnings growth even as other parts of corporate America struggle with geopolitical hiccups, inflationary pressures, and sluggish demand.
Consequently, RBC cut earnings expectations for the non-AI portion of the S&P 500 by 7.5%. On the flip side, AI-related earnings estimates were kept much closer to Wall Street consensus, suggesting the broader weakness could be offset by the AI giants.
So far, the numbers suggest the move was supported by hard earnings data.
According to LSEG data cited by Reuters, Q1 S&P 500 earnings were expected to surge roughly 29% year-over-year, led by AI-heavyweights.
Moreover, according to FactSet’s May 4, 2026, report, the S&P 500 blended earnings growth shot up to a tremendous 27.1%, from 15% a week earlier, led by the Mag7 companies.
However, in a story I covered recently, Goldman Sachs said that AI-investment-related income at Google and Amazon essentially gave the Q1 earnings outlook an artificial boost.
That said, RBC modeled $329 in S&P 500 EPS for early 2027 factoring in 3.3% inflation, a flat Fed rate cut scenario, and a 4.5% 10-year Treasury yield.
Other Wall Street price targets for the S&P 500
- Morgan Stanley: 7,800.
- Bank of America: 7,100.
- Citigroup: 7,700.
- UBS Global Wealth Management: 7,500.
- Goldman Sachs: 7,600.
- JPMorgan: 7,600.
- Barclays: 7,650.
RBC sees upside for stocks, but the market’s risks cannot be ignored
Though there’s a lot to like about the current stock market rally, things aren’t exactly risk-free.
One of the big concerns is valuation.
Stocks are trading at remarkably elevated multiples, with investors paying a steep premium on future earnings expansion.
According to FactSet, the S&P 500’s forward 12-month P/E ratio is at an eye-catching 21 times, comfortably above its 5-year average of 19.9 and 10-year average of 18.9.
That leaves virtually no room for missteps in the macro backdrop or the business itself.
On top of that, there’s also the issue of concentration.
A relatively small group of businesses linked to AI and driving the lion’s share of the gains, as I mentioned earlier
According to Slickcharts, the Mag7 makes up nearly 35% of the index if we count both Alphabet share classes.
Geopolitics adds a ton of uncertainty, too.
For now, though, investors seem to have brushed aside Middle East tensions, but if the conflict becomes more prolonged, things could take a turn for the worse.
RBC modeled those concerns, and for now, it seems that the market can keep climbing, but only if we continue to see AI-driven earnings growth delivering results.
Related: Goldman Sachs dispels major misconception on Google, Amazon earnings
