GS Marson What Matters Today Over earning not bubble 18Sep2026

GS Marson - What Matters Today Over earning, but not an earnings bubble, Positioning Update, Fed Hikes to Slow, Rather than Derail, the Gold Rally 18 Sep 2026 Pedro Marson · Goldman Sachs · Associate, Global Banking & Markets, FICC & Equities Fri 18 Sep 2026, 7:59am ET

1) Over-earning, but not an earnings bubble

The recent strength of S&P 500 earnings growth has raised investor concerns that the market is in an "earnings bubble." S&P 500 EPS grew by 51% in Q2 and by 26% during the past four quarters, lifting earnings well above both the long-term trend and the historical relationship with economic growth. While there are indeed factors contributing to "over-earning" today, our base case is for S&P 500 earnings growth to decelerate, not collapse, in coming years. We forecast EPS growth of 11% in both 2027 (to $415) and 2028 ($460), driven by solid GDP growth and a fading tailwind from AI investment that gradually transitions into a growing boost from AI productivity.

The AI investment boom has accounted for nearly half of S&P 500 earnings growth this year, and this tailwind should begin to fade next year even as capex spending continues to grow. We estimate AI investment will transition from an S&P 500 earnings tailwind of 11 pp this year to a marginal drag in 2028 as capex growth slows and depreciation expenses mount.

The recent surge in semiconductor profit margins also leaves S&P 500 earnings vulnerable to a decline in chip prices. Our industry analysts expect supply to remain tight through 2027 but for the rate of margin expansion to slow next year. An adverse scenario where semiconductor gross margins decline from 70% today to their 15-year average of 55% would cut S&P 500 earnings by roughly 10%. Appreciating equity stakes are also temporarily inflating S&P 500 earnings. The mega-cap tech companies generated over $150 billion of "other income" related to equity investments in Q2 2026, lifting S&P 500 earnings by 12%.