Wall Street News: AI Buzz Fades as Earnings Take Center Stage
The year that belonged to artificial intelligence is ending on a very different note. After months of headlines dominated by Nvidia chips and trillion-dollar valuations, investors on Wall Street are starting to talk about something much less futuristic — profits.
Key Takeaways:
- Earnings growth for the S&P 500 hit 13.1%, with 82% of companies beating estimates.
- Profit strength is now expanding beyond tech into Financials and Consumer sectors.
- UBS and Morgan Stanley raised long-term targets, citing broadening earnings recovery.
- Strategists see AI enthusiasm giving way to a more fundamentals-driven bull market.
Strategists at Morgan Stanley, UBS, and Evercore ISI say the market’s next phase will depend on the one thing that used to drive it before the AI frenzy — earnings growth. The shift comes as corporate results show that the recovery is spreading beyond the handful of tech giants that carried much of the market through 2025.
It’s a subtle change, but one that could define the next leg of this bull market. More than 90% of S&P 500 companies have now reported third-quarter results, and 82% beat forecasts, according to FactSet. Profits across the index grew 13.1% year over year, marking the fourth straight quarter of double-digit expansion.
Even more telling: strength isn’t just in Silicon Valley anymore. Technology remains the top performer, but Financials and Consumer Discretionary are starting to show renewed momentum — a sign that U.S. corporate earnings are broadening out after two years of narrow leadership.
The End of a One-Theme Market
“Earnings power is starting to take the baton from AI,” said one Wall Street strategist. Morgan Stanley’s Mike Wilson echoed that view in a recent note, saying data suggests “pricing power is firming” and “profit margins are beginning to stabilize.” His team sees the Magnificent Seven posting 23% net income growth for the quarter, compared with 12% for the rest of the index — but with early signs that the gap could soon narrow.
UBS analysts have gone even further, raising their S&P 500 target to 7,500 by 2026, projecting 14% annualized earnings growth as corporate investment starts to spread beyond tech. They compared today’s surge in AI infrastructure spending to the mid-1990s tech buildout, which triggered a decade-long productivity boom.
A Rally With Uneven Confidence
Still, optimism isn’t universal. RBC Capital Markets’ Lori Calvasina described the current backdrop as “a recovery, but not yet a breakout.” While profit revisions have improved, they remain below their summer highs. She warned that last week’s brief pullback in U.S. stocks could be “the thunder before a storm,” suggesting investors aren’t fully convinced the rally has staying power.
But she also credited corporate leaders for navigating inflation and high rates more effectively than expected, saying that the “resiliency of the C-suite” is keeping the market grounded even as sentiment cools.
A Broader, Healthier Bull
At Evercore ISI, strategist Julian Emanuel calls the current cycle “K-shaped” — where AI and high-quality growth stocks continue to outperform, yet participation across the broader market remains solid. He said that dynamic sets today’s environment apart from the dot-com bubble, when gains were confined to a few overvalued tech names.
Emanuel’s S&P 500 forecast stands at 7,750 by late 2026, with the top ten stocks still making up around 40% of the index, but not at valuations that threaten stability. “This isn’t excess; it’s evolution,” he wrote.
From Algorithms to Earnings
After a year of record AI investment and hype-fueled rallies, the market is rediscovering its foundation in fundamentals. The conversation on Wall Street has shifted from how artificial intelligence can transform industries to how corporate America can continue to deliver — with or without the buzzwords.
If the current trend holds, 2026 may not be remembered as the year of AI, but as the year earnings breadth returned to the stock market — the quiet force that keeps bull markets alive long after the hype fades.
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Alexander Zdravkov is a person who always looks for the logic behind things. He has more than 3 years of experience in the crypto space, where he skillfully identifies new trends in the world of digital currencies. Whether providing in-depth analysis or daily reports on all topics, his deep understanding and enthusiasm for what he does make him a valuable member of the team.
