UBS maintains bullish stance on US equities as Magnificent 7 earnings validate AI spending, with S&P 500 target of 7,500

Five of the Magnificent 7 technology giants reported strong first-quarter results. Nearly 80% of S&P 500 companies by market capitalisation have beaten both sales and earnings per share estimates, ahead of the long-run average. Earnings growth is coming in above UBS's 17% forecast for the quarter.

Cloud revenue is accelerating and order backlogs for data centre infrastructure are rising sharply, signalling that spending on infrastructure is delivering results. Alphabet Inc indicated capital expenditure growth would remain significant into 2027.

UBS is maintaining its attractive rating on US equities with a year-end S&P 500 target of 7,500. The S&P 500 hit a record high after surging more than 10% in April. UBS noted elevated valuations of around 21 times forward earnings are not in themselves a reason for caution, as the 12-month outlook for corporate profits remains the more important variable.