Goldman flags fading AI boost to S&P 500 EPS

Goldman Sachs strategist Ben Snider estimates that the current boom in artificial intelligence capital expenditure has accounted for nearly half of S&P 500 (SPX) earnings growth this year. This surge in spending on AI-related infrastructure has been a major support for aggregate corporate profitability across the index. The impact has been strong enough that it shapes the overall earnings profile of the S&P 500 in the near term.

Snider’s base case is that this powerful tailwind will not persist at the same intensity. He writes that the benefit from AI capex “should begin to fade next year,” implying that earnings growth driven by this theme is likely to be lower going forward even if spending remains high in absolute terms.

Goldman’s analysis points to a significant slowdown in S&P 500 earnings growth over the next two years compared with this year’s pace. The firm highlights that the dependence on AI-driven investment leaves index-level earnings vulnerable if the capex cycle cools. A moderation in AI infrastructure investment would reduce one of the largest current supports to profit expansion.

Beyond the level of capex itself, Goldman warns that other dynamics in the AI and semiconductor ecosystem could weigh on earnings. If increasing supply or technological shifts lead to lower semiconductor prices, profit margins for chipmakers could compress. That in turn would diminish the contribution of AI-related businesses to S&P 500 earnings per share growth.

Snider also highlights an accounting-related source of risk tied to “other income,” including gains linked to private investments. He estimates that the complete removal of this “other income” next year would, all else equal, subtract about eight percentage points from S&P 500 earnings growth in 2027 relative to 2026. This potential drag adds to the pressure from a fading AI capex boost.

At the same time, Goldman’s industry analysts expect semiconductor supply to remain tight through 2027. However, they anticipate that the rate of margin expansion in the sector will slow starting next year. Even with constrained supply, a deceleration in margin improvement would reduce the incremental boost semiconductors provide to overall index earnings.

Taken together, these factors suggest a more challenging backdrop for S&P 500 earnings growth than in the current year. The combination of a waning AI investment tailwind, possible margin compression in key chip names, and the potential loss of “other income” sources points to downside risk for aggregate EPS. Goldman’s framework implies that investors may face a materially lower earnings growth environment over the coming one to two years.