Key Takeaways
- Technology stocks have generated 85% of the S&P 500’s 10% gain in 2025
- Nvidia accounts for 9% of S&P 500 market capitalization and delivered 20% of index returns
- Goldman describes current market conditions as dominated by a single AI-focused theme
- First quarter earnings surged 17% while capital expenditures jumped 38% annually
- Goldman maintains S&P 500 forecast of 7,600 by year-end, implying modest gains ahead
The S&P 500’s 10% advance in 2025 masks a troubling reality that Goldman Sachs is highlighting for investors.
According to a May 15 research note from Goldman strategist Ben Snider, technology sector stocks have generated 85% of the benchmark index’s performance this year. When tech is excluded, the remaining S&P 500 components have posted merely a 3% gain.
Nvidia stands out as the primary catalyst. The semiconductor giant now comprises 9% of the S&P 500’s total market value and has been responsible for 20% of the entire index’s 2025 returns.
Goldman characterizes the current market environment as increasingly centered around a singular narrative: artificial intelligence. The firm’s momentum indicator has surged 25% during the last three months, marking one of the most aggressive upward movements in its history.
The issue extends beyond mere concentration. Goldman referenced comparable patterns from 1998, 1999, 2015, and 2021, when powerful momentum-driven advances ultimately reversed course and led to weaker overall market performance.
Strong Earnings Provide Foundation for Gains
Goldman emphasized that the current rally isn’t built entirely on speculation. S&P 500 corporations delivered 17% earnings growth year-over-year during the first quarter, after adjusting for extraordinary items.
Analyst projections for forward 12-month earnings have climbed 13% this year, even while the price-to-earnings multiple compressed by 4%.
The bulk of upward earnings adjustments have been concentrated within AI infrastructure businesses and energy sector companies. Beyond these areas, earnings forecasts for 2027 across the remaining S&P 500 constituents have remained essentially unchanged.
Goldman observed that earnings revision breadth expanded across all sectors during the previous month. This indicates the rally extends somewhat beyond just the largest technology corporations.
Capital investment represents a key driver behind rising earnings expectations. S&P 500 firms boosted capital expenditures by 38% year-over-year in the first quarter, while share repurchase programs grew by only 1%.
Goldman projects capital spending will approach approximately $2 trillion in 2026, with AI hyperscale companies potentially accounting for roughly $755 billion of that total.
Goldman Identifies Lower-Risk Investment Options
Goldman identified consumer staples as the sector with minimal exposure to AI momentum trading activity. Healthcare and real estate sectors also demonstrated limited correlation to the AI trade.
The investment bank compiled a selection of stocks featuring positive earnings revisions while maintaining low sensitivity to AI-related trading volatility. This roster featured Eli Lilly, Reddit, Newmont, Archer-Daniels-Midland, and Casey’s General Stores.
Goldman recommended that investors with significant momentum trade exposure consider allocating positions to lower-momentum stocks as a protective measure. Historical data shows lagging stocks have typically outperformed during rapid momentum reversals.
The ten largest S&P 500 companies currently represent 41% of the index’s total market capitalization and generate 34% of aggregate earnings. The typical S&P 500 stock trades 13% beneath its individual 52-week peak.
Goldman retained its year-end 2026 S&P 500 projection of 7,600, suggesting constrained appreciation potential from present levels.
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