US stocks Q2 earnings expectations diverge: Goldman Sachs bullish on diversified growth, Morgan Stanley warns of AI monetization risks.

Notice that, Goldman Sachs strategists have stated that driven by the AI investment boom and unexpected windfall profits from energy companies, US corporations are poised to face another strong earnings season. Led by Ben Snyder's team, analysts predict that earnings of S&P 500 index constituent companies will soar by 22% in the second quarter, a threshold that companies should be able to surpass. They write that given that this year's stock market rally has been driven by stellar earnings, the upcoming earnings season will be a key catalyst for the market. Strategists state that investors' primary focus will be on AI spending outside of large tech companies (i.e. hyperscale cloud providers) and whether all these investments are starting to yield returns. They estimate that especially stocks related to AI infrastructure are expected to contribute to nearly 60% of the earnings per share growth of the S&P 500 index this quarter, adding that Micron Technology and NVIDIA may account for over 40%. Energy and technology sectors will drive the profit growth of the S&P 500 index The strategists write that the second quarter earnings "will demonstrate another quarter of strong profit growth supported by a robust macro backdrop and continued AI investment frenzy". Higher energy prices will also be a major factor this earnings season. It is expected that oil producers will reap hefty profits from the surge in crude oil prices this quarter, while consumer companies will face cost pressures. Goldman Sachs strategists state that for the median company in the S&P 500 index, market consensus expects a 9% increase in earnings. They write, "There is a wide discrepancy in growth expectations between industries and individual stocks." The bank's optimistic outlook aligns with forecasts compiled by BI, indicating that second-quarter earnings could jump by around 23%. This would be close to the stellar performance of the previous earnings season. Earnings of S&P 500 index constituent companies in the first quarter surged by nearly 30%, more than twice the roughly 12% analysts had previously expected. The last time earnings grew at this pace year-over-year in a post-recession background without major shocks was over twenty years ago in 2004. Bulls: From "solo run" to "blooming flowers" in the bull market On Wall Street, Goldman Sachs' optimistic expectations for the US stock market in the second quarter are not isolated, as Bank of America and UBS also firmly remain on the bullish side. According to FactSet-tracked Wall Street analyst consensus, earnings growth forecast for the S&P 500 index in the second quarter of 2026 has been raised from around 15% at the beginning of the year to the range of 19%-21%. As of early May, this forecast briefly reached a year-to-date high of 21.3%, then slightly retreated to 19.9%, but still significantly above the long-term average. This continuous upward trend reflects analysts' strengthening confidence in the AI investment frenzy and improvement in the macro environment. Bank of America's strategy team points out that the second quarter of 2026 will be a milestone for the AI dividend to shift from "hardware monopoly" to "full industry chain diffusion." Second-quarter earnings reports will not only confirm the dominance of chip giants like NVIDIA but also demonstrate a significant downward spread of AI return on capital (ROC) in traditional power generation, traditional server assembly, and even traditional industry and financial leaders. UBS Global Wealth Management, on the other hand, endorses from the perspective of the macro cycle. UBS believes that the US stock market is currently in a sweet spot of productivity improvement and an "easy landing" for the economy. The most critical turning point is that for the rest of the 493 constituent companies in the S&P 500 index other than the tech "Big Seven," their earnings growth rate is expected to achieve the first "collective turning positive and accelerating" in nearly two years. This transformation from "solo show" to "blooming flowers" in earnings structure is building a more solid bottom support for the bull market of the US stock market in 2026. Bears: Underneath the prosperity lies the "capital expenditure trap" and "energy heavy taxation" However, behind the impressive growth numbers, the other side of the coin has also sparked deep concerns among some major banks about valuation peaks and inflation backlash. The "bearish indicator" on Wall Street, Morgan Stanley, warns that the dazzling earnings per share (EPS) growth in the second quarter may mask the grey rhino risk of "capital expenditure return rate blunting." Morgan Stanley strategists point out that if hyperscale cloud providers continue to plow billions of dollars into hardware purchases this quarter, and downstream software, healthcare, and retail enterprises cannot demonstrate in their financial reports that "AI has indeed made the company earn real gold and silver," then the current tech stock premium may be unsustainable, and the market is likely to fall into a sharp correction of "good news running out" post-earnings season. JPMorgan Chase, on the other hand, points to the "double-edged sword" effect of soaring energy prices. JP Morgan's research department points out that while the surge in crude oil prices in the second quarter has brought unexpected windfall profits to energy giants, boosting the overall accounting profits of the S&P 500, this fundamentally is a form of "bloodletting of interests" for the real economy. The bank warns that the second-quarter financial results will mercilessly reveal a severe shrinking of profit margins in consumer goods, aerospace, and logistics sectors. What's worse, the skyrocketing oil prices exacerbate the shadow of inflation that has been following in 2026, potentially forcing the Federal Reserve to linger on the high-interest rate throne longer, thereby silently strangling the valuations of the US stock market in the third quarter.