Wells Fargo Predicts S&P 500 to Reach 7,200 by End of 2026 Powered by AI.

Wells Fargo strategists remain bullish on US equities, forecasting the S&P 500 to reach 6,650 by year-end 2025 and 7,200 by year-end 2026. Their outlook is based on their PRSM framework, which considers profits, rates, sentiment, and macro factors. The firm expects a 9% return, driven by the adoption of AI and its impact on the economy.

Wells Fargo strategists have reiterated their bullish stance on U.S. equities, forecasting the S&P 500 to reach 6,650 by year-end 2025 and 7,200 by year-end 2026. Their outlook is guided by the firm's PRSM framework, which considers profits, rates, sentiment, and macro factors, signaling a 9% return over the next 12 months Wells Fargo stays bullish, betting AI will power S&P 500 to 7,200 by end 2026^[2].

The strategists, led by Ohsung Kwon, expect S&P 500 EPS of $270 in 2025, up 11% Y/Y; $300 in 2026, up 11% Y/Y; and $335 in 2027, up 12% Y/Y. They note that the market has become increasingly earnings-driven, with over two-thirds of the S&P 500's return over the past 12 months driven by forward EPS growth Wells Fargo stays bullish, betting AI will power S&P 500 to 7,200 by end 2026^[2].

Wells Fargo analysts attribute the continued bull market to sustained investment in artificial intelligence (AI). They believe that AI capex remains intact, and the investment cycle could be as big as the internet cycle, requiring much more compute power Wells Fargo stays bullish, betting AI will power S&P 500 to 7,200 by end 2026^[2]. The firm expects AI to continue leading the market higher unless rates fall more significantly. They estimate a 4% hit to EBIT due to tariffs, assuming no cost pass-through Wells Fargo stays bullish, betting AI will power S&P 500 to 7,200 by end 2026^[2].

The analysts also note that the AI investment cycle has led to a mismatch between investment and actual adoption. While investment in AI infrastructure has surged, corporate adoption remains hesitant due to concerns around data security, quality, and availability Fewer Hallucinations Could Mean Faster AI Adoption by ...^[3]. However, recent research suggests that addressing overconfidence in AI models could help alleviate these barriers to adoption Fewer Hallucinations Could Mean Faster AI Adoption by ...^[3].

Despite the cautious approach of larger firms, Wells Fargo remains optimistic about the long-term potential of AI. The firm expects the AI investment cycle to continue, driving economic growth and supporting the bull market in U.S. equities Wells Fargo stays bullish, betting AI will power S&P 500 to 7,200 by end 2026^[2].