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S&P 500 Posts Biggest Gain Since 2020 Amid AI Surge

5/5/2026

Summary

S&P 500 Surges

The S&P 500 posted its strongest gain since late 2020, keeping equities near record highs.
Analysts expect Q1 earnings growth of 15% and report FactSet shows 84% of companies posted surprises through late April.
AI investment expands earnings but adds valuation complexity as rising memory and semiconductor costs threaten margins at tech firms.
Wealth advisors should use a diversified approach that selects firms with strong balance sheets and AI plans.

Summary

Morgan Stanley Raises

Morgan Stanley raised its 2026 capex outlook for Amazon, Alphabet, Meta, Microsoft and Oracle to $805 billion, double the prior forecast.
Markets give Microsoft a 0.8% chance to lead by end-2026 and rate Meta’s $740 target by Apr 2026.
Observers link the capex surge to U.S.–China tech rivalry and the CHIPS and Science Act.
Caterpillar sees demand for power-generation systems as AI data-centers expand, noting the forecast won’t affect SpaceX’s IPO timeline.

Summary

Business Investment Drives

Business investment was the primary driver of first-quarter GDP growth, outpacing consumer spending, the U.S. Bureau of Economic Analysis reports.
The economy’s temporary shift toward investment-led growth is helping offset macro headwinds such as crude oil above $100 and critical shipping-lane disruptions.
Moody’s Analytics economists warn that without the AI-driven investment boost, recession risks would be materially higher.

Summary

Advisors Layer AI

Advisors are urged to layer AI exposure across enablers, intelligence, and applications to balance risk and return.
Enablers, intelligence, and applications cover chip designers and fabricators, data-processing platforms, and end-user software services respectively.
Adding equipment suppliers, infrastructure providers, and energy firms captures data-center electricity, cooling, and real-estate effects.
The iShares Expanded Tech-Software Sector ETF recovery signals improving sentiment, prompting advisors to expect volatility-driven rebalancing toward under-represented mid-cap and international equities.

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S&P 500 Surges

The S&P 500 posted its strongest gain since late 2020, keeping equities near record highs.
Analysts expect Q1 earnings growth of 15% and report FactSet shows 84% of companies posted surprises through late April.
AI investment expands earnings but adds valuation complexity as rising memory and semiconductor costs threaten margins at tech firms.
Wealth advisors should use a diversified approach that selects firms with strong balance sheets and AI plans.

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