Investing.com -- UBS revealed in a note on Friday that it has raised its S&P 500 year-end price target to 7,900 from 7,500 and introduced a June 2027 target of 8,200, citing resilient consumer spending, strong first-quarter earnings and surging demand for artificial intelligence infrastructure.

In a note to clients, UBS raised its 2026 earnings per share estimate for the S&P 500 to $335 from $310, representing 20% growth, and introduced a 2027 estimate of $375, implying 12% growth. The firm said higher profit estimates are the main driver of the price target increases.

About half of the upward earnings revision is concentrated in semiconductors, particularly memory chip pricing, with energy sector profits accounting for roughly another quarter of the increase.

UBS explained that the revisions follow an increase in its estimates for data center investment spending in 2026.

Despite the upgrade, UBS flagged the ongoing closure of the Strait of Hormuz as the primary near-term risk, warning that "a resumption of energy flows from the Strait of Hormuz is probably needed for the next leg of the rally."

The firm said rising long-term rates or a Fed pivot back to rate hikes due to higher inflation are additional risks, though not part of its base case.

UBS retained its Attractive view on U.S. equities, saying it believes "the bull market drivers remain intact: resilient economic and profit growth, a supportive Federal Reserve, and the AI rollout," while cautioning investors in semiconductor stocks to be prepared for possible volatility given the scale of recent gains in that segment.