Why US Stocks Can Still Climb: Earnings and AI Liquidity Are Still Lifting the Market

Earnings support is real, but leadership remains narrow

This rally has real earnings support. Consensus EPS estimates have trended higher, and Reuters said earlier this month that estimates for the rest of 2026 have also boomed. That makes this more than a pure sentiment spike. It is a market moving to new highs with improving profit expectations behind it, so writing it off too quickly may prove costly.

The upside case is clear, but the market is still narrow. Micron and Exxon alone drove more than 60% of the 2026 revision, while the median S&P 500 company saw little or no recent change to its 2026 EPS estimate. Even so, bulls can still argue that a concentrated earnings surge can lift the broader index, especially when corporate earnings growth continues to look strong.

Bears also have a real argument. Leverage can amplify gains in a rally, but it can also accelerate losses if sentiment turns. The same estimate revisions lifting stocks also mean the bar is getting higher, so the main risk is not just narrow leadership. It is expectations.

AI spending and earnings upgrades are still funding the move

Rising profit estimates are still attracting capital

The mechanism is straightforward: rising profit estimates attract capital, and that capital then chases the parts of the market most exposed to the next leg of AI spending. 2026 and 2027 S&P 500 EPS estimates are 4% above January levels, which suggests this move is being financed by fundamentals rather than mood alone. Once flows move into AI-linked names, they can reinforce the story through valuation, financing access, and momentum.

SK Hynix's U.S. listing was a useful read-through. The company raised about $26.5 billion, and the strong demand helped keep the memory-chip narrative intact even after a recent sector pullback.

Wall Street still sees earnings and AI as the main drivers

The policy backdrop helps, but earnings remain the heavier lifters. Citigroup lifted its 2026-end S&P 500 target to 8,100 and also raised its 2026 EPS forecast to $350, linking the higher target to corporate earnings resilience and AI-driven growth. Bears can still argue that AI capex may not stay linear beyond 2027 and that the rally remains too narrow. That is fair. But in the near term, sellers still have to show that earnings upgrades and AI-linked funding flows have actually slowed.

With chip names still under scrutiny into this week's earnings slate, the market is still being pushed higher more by earnings expectations and AI liquidity than pulled down by them.

Breadth, not price alone, will decide how durable this rally is

After the S&P 500's rare 10% surge in 11 trading days, the question is no longer whether the breakout happened. It is whether the market can hold it with broader participation. The index is already back near the highs, so the next test is simple: do more stocks join the move, or do the same leaders carry the burden again?

Megacaps and semis can still lead. But the rally becomes more durable only if breadth improves. The encouraging signal is that breadth conditions have been quite supportive as the index has pushed higher. The caution is that the advance-decline line has not yet confirmed. That gap is the whole setup.

What to watch next

• Confirming: the index stays near highs while the advance-decline line starts moving up with price. That would suggest the move is becoming breadth-backed rather than leadership-dependent.
• Still bullish, but narrower: megacaps and semis keep leading without full confirmation. That can support another leg, but it is not yet a clean broadening signal.
• Breaking the rally: price slips while the advance-decline line still has not confirmed, and earnings fail to keep pace with the fact that estimates for the rest of 2026 have also boomed. Higher estimates support stocks, but they also raise the bar for delivery.