Investing.com -- JPMorgan raised its 2026 S&P 500 price target to 8,000 from 7,800, a move driven by a strong and broad-based second-quarter earnings season and improving evidence of monetization in AI spending.

With 87% of S&P 500 companies having reported, strategists led by Dubravko Lakos-Bujas said the earnings picture "remains strong and broad-based across multiple sectors."

The bank raised its 2026 EPS estimate to $365, implying 35% year-over-year growth and above the consensus estimate of $358, while lifting its 2027 estimate to $420, or 15% growth. Strategists noted that private-company stake valuations are boosting EPS by roughly $18 based on first-half 2026 marks; excluding that contribution, normalized 2026 EPS would be $347, up 28% year-over-year.

Despite "one of the strongest fundamental backdrops since GFC," JPMorgan kept its forward multiple unchanged at roughly 20 times, citing higher-for-longer rates, geopolitical uncertainty and heavy equity and debt supply still to be absorbed.

The strategists pointed to hyperscaler capital spending as the season’s key theme, with a sharper focus on monetization and return on invested capital. They said signs of that showed up most clearly at Google, Amazon and Microsoft, where "stronger cloud growth, backlog expansion, and improved operating cash flow visibility cleared a high investor expectation bar."

Consensus estimates now project AI capex reaching roughly $900 billion by year-end, up 85% year-over-year, and topping $1.2 trillion by the end of next year.

Demand indicators across hyperscalers remained elevated, with AWS revenue growth accelerating to 37% year-over-year, Azure growing 43%, and Google Cloud posting record 82% growth. Google Cloud’s backlog rose $52 billion quarter-over-quarter to $514 billion, while AWS’s backlog climbed to $496 billion, up 36% quarter-over-quarter and nearly 2.5 times year-over-year.

Free cash flow, however, is expected to stay under pressure. Strategists noted hyperscaler trailing-twelve-month net income now stands at $599 billion against $169 billion of free cash flow, a gap of $430 billion, compared with both metrics being roughly equal at the end of 2023. Except for Microsoft, the bank’s analysts project negative free cash flow for most of the group through 2026-2027.