Citi Lifts S&P 500 Forecast to 8,100 After Friday’s Selloff — Here’s Why

TLDR

• Citigroup raised its S&P 500 year-end target to 8,100, up from 7,700
• The S&P 500 dropped 2.5% on Friday, its worst single day since October
• Citi raised its 2026 earnings-per-share forecast to $350, up from $320
• A preliminary 2027 EPS target of $400 was also introduced
• Citi warns AI spending growth may slow after 2027, risking a market “hangover”

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The S&P 500 had its worst day since October on Friday, falling 2.5% and snapping a nine-week winning streak. Despite that, Citigroup strategist Scott Chronert raised his year-end S&P 500 target from 7,700 to 8,100 the same evening.

That new target implies about 10% upside from the index’s last close.

The Nasdaq also posted its worst single day in more than a year on Friday. Concerns around AI spending and Broadcom’s earnings were cited as the main drivers of the selloff.

Chronert said the drop doesn’t change his view. He believes earnings growth, not expanding valuations, will be what drives the index higher from here.

Earnings Forecasts Get an Upgrade

Citi raised its 2026 S&P 500 earnings-per-share estimate to $350, up from $320 set in December 2025. The firm also introduced a preliminary 2027 EPS target of $400.

Chronert said he has “high confidence in continued earnings beats” through the end of 2026. The strong first-quarter earnings season supports that view.

He noted that AI-related growth is spreading beyond just technology companies. Other sectors are starting to benefit, which broadens the earnings story across the market.

Citigroup joins several other Wall Street firms that have raised their S&P 500 targets above 8,000 in recent months.

AI Spending: A Key Driver With a Question Mark

Citi describes the current AI investment environment as a “one-time capex supercycle,” not a traditional business cycle. That framing matters because it puts more pressure on earnings to justify stock prices going forward.

The firm said attention will eventually shift to whether companies can deliver real productivity gains from AI. That proof point, Chronert said, is not yet being demanded by the market.

Citi did issue a warning about what comes after 2027. The firm acknowledged that some slowdown in AI spending is likely eventually, and that this could create a “hangover effect” for equity markets.

But Chronert was clear that this risk is “not currently in the line of sight.”

For now, macro risks including the Iran conflict, oil prices, inflation, and interest rates are secondary concerns. Citi’s view is that underlying AI fundamentals are what investors are focused on.

Even if AI spending pulls back at some point, broader adoption of the technology could create a new layer of support for corporate earnings.

The S&P 500 is still up nearly 8% for the year, despite Friday’s sharp drop.