Key Takeaways
- Citigroup increased its S&P 500 year-end projection to 8,100 from a previous 7,700
- Friday saw the S&P 500 plunge 2.5%, marking its steepest single-session loss since October
- The firm elevated its 2026 earnings-per-share projection to $350 from $320
- Citi also unveiled a preliminary 2027 EPS estimate of $400
- The bank cautions that AI investment momentum could decelerate post-2027, potentially creating market challenges
Friday delivered the S&P 500’s steepest decline since October, with the benchmark index tumbling 2.5% and ending a nine-week rally. Yet in the aftermath of that selloff, Citigroup strategist Scott Chronert elevated his year-end S&P 500 projection from 7,700 to 8,100.
This revised forecast suggests approximately 10% potential upside from the index’s most recent closing level.
The Nasdaq experienced its sharpest single-day retreat in over twelve months on Friday as well. Uncertainty surrounding artificial intelligence capital expenditures and Broadcom’s quarterly results were identified as primary catalysts for the downturn.
Chronert indicated that the recent decline hasn’t altered his outlook. His thesis centers on earnings expansion rather than valuation multiples as the primary engine for future index gains.
EPS Projections Receive a Boost
Citigroup elevated its 2026 S&P 500 earnings-per-share forecast to $350, up from the $320 estimate issued in December 2025. Additionally, the firm unveiled an initial 2027 EPS target of $400.
Chronert expressed “high confidence in continued earnings beats” extending through late 2026. The robust first-quarter earnings reporting period reinforces this perspective.
He emphasized that AI-driven growth is now extending beyond the technology sector. Additional industries are beginning to capture benefits, which diversifies the earnings narrative throughout the broader market.
Citigroup is among multiple major Wall Street institutions that have pushed their S&P 500 forecasts beyond the 8,000 threshold in recent periods.
AI Capital Spending: A Critical Catalyst With Uncertainty Ahead
Citi characterizes the present artificial intelligence investment landscape as a “one-time capex supercycle” rather than a conventional economic cycle. This distinction carries significance because it intensifies the emphasis on earnings performance to validate current equity valuations.
The firm indicated that market focus will ultimately transition toward whether organizations can demonstrate tangible productivity improvements from AI technology. Chronert noted that investors aren’t yet demanding this evidence.
Citi did offer a cautionary note regarding the post-2027 outlook. The firm recognized that some deceleration in AI-related spending appears probable at some juncture, which could produce a “hangover effect” across equity markets.
However, Chronert emphasized that this potential risk is “not currently in the line of sight.”
For the present moment, macro considerations including the Iran situation, crude oil pricing, inflation trends, and interest rate policy represent secondary concerns. Citi’s assessment is that fundamental AI dynamics remain the market’s primary focus.
Even should AI investment activity moderate eventually, widespread adoption of the technology could establish an additional foundation for corporate profit growth.
The S&P 500 maintains a roughly 8% year-to-date gain, notwithstanding Friday’s pronounced setback.
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