Bank of America boosts S&P 500 earnings outlook on AI drivers

Bank of America has raised its EPS (earnings per share) outlook for the S&P 500 (^GSPC) to $250 in 2024. Yahoo Finance Live comments on BofA's new earnings forecasts and the role AI and Magnificent Seven tech stocks have played in pushing the S&P higher.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Luke Carberry Mogan.

Video transcript

- Time now to dig a little deeper into some analyst calls of the day, starting with Bank of America raising its 2024 earnings per share. That's EPS target for the S&P 500. Citing a virtuous cycle in AI investment paired with a new labor productivity, they raised their EPS target by 12% for the year end to $250. And Julie, they are now a Street high. And they're touting that in their own report. They're happy to be there. I would say Savita Subramanian and the other teams there, they've been ahead of the pack. They were quite right last year early on when a lot of other analysts were negative. But they've come around, and now this earnings per share that puts them at $250 for this year, $275 for next.

JULIE HYMAN: Yeah. And I think it's so interesting that AI has gone from being a specific company story, or even a sector story to really more of a macro story. Right? I mean, because they talk about that quote unquote, "virtuous investment cycle." They talk about new economy investing as the old economy cuts back. And this is according to Bank of America a flip of last year when we saw the so-called hyperscalers, the companies like Microsoft and Amazon and Alphabet, that were cutting back while the rest of the S&P 500 was investing. Now you've seen a flip of that situation. But obviously, the team over there sees this as enough to boost that EPS number.

- Well, and for all the talk about share buybacks and dividends, we can also-- investors can also get a return on their capital through capital investments or capital expenditures. And this is-- here's another line from the report. Hyperscalers, this includes Microsoft, Amazon, Google, Meta, expected to spend $180 billion on capital expenditures this year. That's up 27%.

JULIE HYMAN: Yeah.

- So just an amazingly high number that's going into the future basically.

JULIE HYMAN: And then on the old economy side just one more quick note, they also say they see a manufacturing upgrade and perhaps a restocking cycle. Right? Because you had over inventory.

- We've been in a manufacturing recession.

JULIE HYMAN: Right. And then you just had an inventory correction, and now I guess the correction to the correction would be that restocking taking place.

- Correction to the correction is up, guys.

JULIE HYMAN: Yeah.

[CHUCKLES]

Exactly.