The S&P 500 will deliver higher-than-expected earnings in 2024, fueled by steady growth and advances in artificial intelligence, according to analysts at Bank of America Corp. (BAC), recognized as one of Wall Street’s top earnings forecasters. In a recent statement, the financial institution commented that they have raised their S&P 500 earnings per share (EPS) estimate to $250 for 2024
This is a significant increase of 21% over the previous year. This upward estimate not only shows a positive outlook for corporate earnings but also positions Bank of America as one of the most optimistic forecasters on Wall Street. According to the banking institution, this may be the highest projection in recent times.
«2023 was a year of transition for US companies, adjusting to higher rates and the subdued demand environment. Our framework indicates that earnings per share did not grow sufficiently in 2023, so they should recover in 2024,» they note.
They also came out ahead in their 2025 earnings forecast, with an estimate of $275 per share.
The bank estimates that major computer companies such as Microsoft (MSFT), Amazon (AMZN), Alphabet (GOOGL) and Meta (META) will spend about $180 billion on capital spending in 2024, up 27% from last year.
The $38 billion annual increase in capital spending is expected to comprise about 80% of their earnings growth estimates, indicating that these companies are beginning a phase of increased investment.
Major artificial intelligence cycle
Bank of America highlights the developing role artificial intelligence (AI) is taking in the financial sector and, by extension, the stock market. It states that «AI investments are forming a potential virtuous cycle,» which adds a number of more than positive effects in different sectors.
In addition, they identify semiconductors and networking as the biggest beneficiaries of these investments, and points to the potential additional demand that will be generated by increased energy use and data center construction. Bank of America estimates that these AI-related trends could have a marked impact on future earnings growth for stocks and, consequently, on the performance of the S&P 500.
Upward earnings revision also for 2025
Bank of America’s confidence is not just focused on this year. The banking institution is also looking deeper, launching its 2025 EPS estimate at $275, which represents an additional 10% increase over the previous year.
Bank of America is confident that the recovery in demand will serve as the primary driver of profits for 2024 and 2025, indicating that market performance will largely hinge on the strength of the economy and consumer trends. However, the bank also highlights potential risks from tariffs, especially if Donald Trump wins the upcoming U.S. presidential election. Such an outcome could exert additional pressure on corporate earnings through stock performance.
