Investing.com -- JPMorgan raised its S&P 500 year-end price target to 7,800 in a note on Wednesday, citing an earnings upgrade cycle it described as "unprecedented," driven by the artificial intelligence capital expenditure boom and an improving geopolitical backdrop following U.S.-Iran peace progress.

In a mid-year outlook note, analyst Dubravko Lakos-Bujas said consensus earnings growth has been revised higher by roughly 20% on average for the next two years, "in lockstep with a near doubling of AI capex."

The bank also lifted its 2026 S&P 500 earnings per share estimate to $350, representing 29% year-over-year growth, with 2027 EPS forecast at $390, though that figure sits below current consensus, reflecting "the risk of diminishing AI-related pricing power."

JPMorgan believes the scale of positive estimate revisions is "typically seen only after a shock or post-recession," with the catalyst in this cycle being last earnings season’s raised capex budgets and the April Anthropic headline "confirming the viability of AI Services."

Despite the constructive target, the bank cautioned that "the path upwards will likely be non-linear."

Lakos-Bujas flagged extreme crowding in momentum factors, particularly in low-quality and speculative growth segments, as facing "a high probability of a flash-crash." Rapidly increasing equity supply and potentially tighter monetary policy could also constrain multiples.

On sector positioning, JPMorgan remains overweight technology, AI upstream plays, defense and banks, while flagging growing value in healthcare. Energy, despite an approximately 19% gain year-to-date, is seen as "ripe for profit taking."