Wells Fargo Predicts S&P 500 to Reach 6,650 by 2025 and 7,200 by 2026, Driven by AI Capex and Profits

Wells Fargo analysts predict the S&P 500 will reach 6,650 by 2025 and 7,200 by 2026, driven by their PRSM framework. They expect strong profits, modest tech spending, and improved macro conditions. The bank also notes potential risks, such as tariffs and opposing mega cycles of devaluation and productivity.

Wells Fargo analysts have reiterated their bullish call on U.S. equities, predicting the S&P 500 to reach 6,650 by the end of 2025 and 7,200 by the end of 2026. This outlook is guided by the firm's PRSM framework, which signals 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^[1].

The analysts, led by Ohsung Kwon, expect S&P 500 EPS of $270 in 2025, up 11% year-over-year; $300 in 2026, up 11% year-over-year; and $335 in 2027, up 12% year-over-year. They note that while the market is currently driven by earnings growth, future returns will be more influenced by EPS than multiples Wells Fargo stays bullish, betting AI will power S&P 500 to 7,200 by end 2026^[1].

A key factor in the rally is expected capex into artificial intelligence (AI). Kwon expects AI to continue leading the market higher unless rates fall more significantly. He notes that the AI investment cycle could be as big as the internet cycle, requiring much more compute power than previous cycles of innovation Wells Fargo stays bullish, betting AI will power S&P 500 to 7,200 by end 2026^[1].

The analysts are slightly above consensus in the current year but below in 2026-27 on lower margins. They expect the PMI to enter a mini recovery cycle post peak tariff uncertainty, but a sustained recovery requires a 10-year yield well below 4% and closer to 3% for a real upcycle. On the impact of tariffs, they estimate a 4% hit to EBIT, assuming no cost pass-through Wells Fargo stays bullish, betting AI will power S&P 500 to 7,200 by end 2026^[1].

Wells Fargo analysts are overweight on technology, financials, and utilities, and underweight on energy, materials, consumer staples, and consumer discretionary. They recommend owning both ends of the spectrum: AI, power, and automation for productivity, and gold to hedge against devaluation Wells Fargo stays bullish, betting AI will power S&P 500 to 7,200 by end 2026^[1].

The S&P 500 finished the holiday week modestly higher, with investors weighing mixed economic data against the likelihood of a Fed rate cut. The week's performance was mixed, with the Dow down 0.3%, the S&P 500 up 0.3%, and the Nasdaq up 1.1% S&P 500 Advances on Rate Cut Optimism Following Soft ...^[2].