Wells Fargo analysts remain bullish on U.S. equities, projecting the S&P 500 will reach 6,650 by the end of 2025 and 7,200 by year-end 2026, driven by their PRSM (Profits, Rates, Sentiment, Macro) framework.
“Music stops when AI capex stops. Enjoy the party,” the bank writes, emphasising that as long as investment in artificial intelligence continues, the bull market should persist.
Profits are a key driver, with Wells Fargo expecting “+11% YoY for 2026E EPS and +12% for 2027E.”
The bank noted that rates are slightly positive, sentiment is neutral, and macro conditions have improved for the fourth consecutive month. The analysts highlight that current tech spending is modest compared with past cycles, noting that “Tech equipment spend is just 2.0% of GDP today vs. 2.6% during the PC boom (1984) and 2.9% during the internet era (2000).”
The report also underscores risks. Tariffs could weigh on earnings, with heavy importers potentially facing a “4% hit to EBIT without any offsets.”
Wells Fargo suggests owning B2B-focused companies over B2C names, citing stronger pricing power in the business-to-business segment.
Looking at the broader economic landscape, the analysts point to opposing mega cycles of devaluation and productivity.
Wells Fargo wrote: “Rising fiscal deficits and inflation have spurred the fourth currency devaluation cycle since the 1870s…But a potential productivity cycle (AI + re-industrialization) could reverse the trend, reducing deficits and inflation. It’s the ultimate bull case for stocks.”
Source :
https://www.investing.com/news/stock-market-news/music-stops-when-ai-capex-stops-enjoy-the-party-wells-fargo-4233418
