Michael Nagle/Bloomberg via Getty Images<\/p>\n<\/figcaption><\/figure>\n One of the most obvious criticisms of the current stock market rally has been that it\u2019s too narrow.<\/p>\n Tech stocks, chip companies, and AI infrastructure names did most of the heavy lifting, leaving investors questioning the broader market’s strength.<\/p>\n More Wall Street<\/strong><\/p>\n Analysts at RBC Capital Markets, though, see things a lot differently.<\/p>\n RBC believes the market is evolving into a \u201ctwo-speed\u201d economy, where AI companies continue to deliver strong earnings growth even as other parts of corporate America struggle with geopolitical hiccups, inflationary pressures, and sluggish demand.\u00a0<\/p>\n Consequently, RBC cut earnings expectations for the non-AI portion of the S&P 500 by 7.5%. On the flip side, AI-related earnings estimates were kept much closer to Wall Street consensus, suggesting the broader weakness could be offset by the AI giants.<\/p>\n So far, the numbers suggest the move was supported by hard earnings data.<\/p>\n According to LSEG data cited by Reuters, Q1 S&P 500 earnings were expected to surge roughly 29% year-over-year, led by AI-heavyweights.<\/p>\n Moreover, according to FactSet\u2019s May 4, 2026, report, the S&P 500 blended earnings growth shot up to a tremendous\u00a0 27.1%, from 15% a week earlier, led by the Mag7 companies. \u00a0<\/p>\n However, in a story I covered recently, Goldman Sachs said that AI-investment-related income at Google and Amazon essentially gave the Q1 earnings outlook an artificial boost.<\/p>\n That said, RBC modeled $329 in S&P 500 EPS for early 2027 factoring in 3.3% inflation, a flat Fed rate cut scenario, and a 4.5% 10-year Treasury yield.\u00a0<\/p>\n Though there\u2019s a lot to like about the current stock market rally, things aren\u2019t exactly risk-free.<\/p>\n One of the big concerns is valuation.<\/p>\n Stocks are trading at remarkably elevated multiples, with investors paying a steep premium on future earnings expansion.\u00a0<\/p>\n According to FactSet, the S&P 500\u2019s forward 12-month P\/E ratio is at an eye-catching 21 times, comfortably above its 5-year average of 19.9 and 10-year average of 18.9.\u00a0<\/p>\n That leaves virtually no room for missteps in the macro backdrop or the business itself.\u00a0<\/p>\n On top of that, there\u2019s also the issue of concentration.<\/p>\n A relatively small group of businesses linked to AI and driving the lion\u2019s share of the gains, as I mentioned earlier<\/p>\n According to Slickcharts, the Mag7 makes up nearly 35% of the index if we count both Alphabet share classes.\u00a0<\/p>\n Geopolitics adds a ton of uncertainty, too.<\/p>\n For now, though, investors seem to have brushed aside Middle East tensions, but if the conflict becomes more prolonged, things could take a turn for the worse.<\/p>\n RBC modeled those concerns, and for now, it seems that the market can keep climbing, but only if we continue to see AI-driven earnings growth delivering results.<\/p>\n Related: Goldman Sachs dispels major misconception on Google, Amazon earnings<\/strong><\/p>\n #RBC #revamps #SampP #target #rest<\/p>\n","protected":false},"excerpt":{"rendered":" Wall Street\u2019s bull case on stocks just got another major vote of confidence. RBC Capital Markets bumped its 12-month target for the S&P 500 to 7,900 from 7,750, as stocks… <\/p>\n","protected":false},"author":1,"featured_media":2398,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[246],"tags":[4237,865,1362,2321,1196],"class_list":["post-2397","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-popular","tag-rbc","tag-rest","tag-revamps","tag-sampp","tag-target"],"_links":{"self":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts\/2397","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2397"}],"version-history":[{"count":0,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/posts\/2397\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=\/wp\/v2\/media\/2398"}],"wp:attachment":[{"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2397"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2397"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.fintechpulse8.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2397"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![](\"https:\/\/www.thestreet.com\/.image\/NDA6MDAwMDAwMDAyOTg3MjAy\/ackmans-pershing-square-fund-ipo-raises-5-billion-for-permanent-capital-plan.jpg?io=1&profile=rss\")
S&P 500 price-index checkpoints through the latest close<\/strong><\/h3>\n
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\nSource: FRED\/S&P Dow Jones Indices.\n<\/li>\n<\/ul>\nRBC sees AI creating a two-speed stock market<\/strong><\/h2>\n
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Other Wall Street price targets for the S&P 500<\/strong><\/h3>\n
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RBC sees upside for stocks, but the market\u2019s risks cannot be ignored<\/strong><\/h2>\n