US Stock Market Outlook: HSBC Predicts AI Investment Will Drive S&P 500 Growth in 2026
HSBC analysts Nicole Inui, Alastair Pinder, and Matt Borchetta, wrote in a report that, “AI capex spend should continue to dominate in 2026 as the AI arms race intensifies,” as quoted by Yahoo Finance. The bank’s outlook suggests that rallies fueled by AI investments can last for some time, encouraging investors to broaden their AI-related trades beyond the major tech giants.
S&P 500 Forecast Evokes Comparisons to Late 1990s Tech Boom
The forecast evokes comparisons to the late 1990s tech boom, suggesting another year of double-digit growth. Yet HSBC cautions that economic conditions for consumers will remain uneven.
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HSBC Warns: Uneven Consumer Conditions Expected Despite AI Gains
The analysts noted that, “While the AI investment boom should support the economy, we see a more unsteady consumer. Inflation remains sticky, the labor market is wobbly, and policy changes skew more favorably to higher-end consumption,” as quoted by Yahoo Finance.
Understanding the K-Shaped Economy and Consumer Spending
This pattern reflects a “K-shaped” economy, in which high earners and those with strong credit continue spending and are confident about the economy, while low-income consumers remain cautious. Recent earnings reports reinforced this trend as travel and hospitality companies like Delta focused on premium offerings, while value-driven retailers such as Walmart and the owner of TJ Maxx, Marshalls, and Home Goods benefited from budget-conscious shoppers, as per the report.ALSO READ: Spotify price hike alert: US subscription to rise next year for third time in 3 years – how much will you pay in 2026?
How Federal Reserve Policy Impacts 2026 Market Outlook
HSBC expects this divide to widen in 2026, as policy changes favor higher-end consumers and the Federal Reserve maintains its current stance. The analysts wrote that, “We see this K-shaped consumer theme widening in 2026 as policy shifts skew towards higher-end consumers and the Fed remains on hold,” as quoted by Yahoo Finance.
Stock Market Forecast: Deutsche Bank Predicts Even Higher S&P 500 Target For Next Year
Other firms echo HSBC’s optimism. Deutsche Bank, for example, recently set a year-end 2026 target of 8,000, citing rapid AI investment and adoption as a major driver of market sentiment.
AI Growth Expanding Beyond Big Tech Companies
While a few hyperscale tech firms have dominated the AI trade so far, HSBC expects 2026 to see growth extend to a wider range of companies involved in AI adoption and enabling technologies.
FAQs
What is HSBC’s S&P 500 target for 2026?
HSBC expects the S&P 500 to reach 7,500 by December 2026.
What is a “K-shaped” economy?
It’s when high earners spend confidently while low-income consumers remain cautious.