Can Tech Stocks Keep Climbing? Why the S&P 500 Could Hit 7,500 (And Why It Might Not)

The stock market’s defining narrative in 2025 has been crystal clear: artificial intelligence. It’s reshaping industries, altering business models, and fundamentally steering the market’s trajectory. As we look ahead to 2026, the S&P 500 sits around 6,840—a level that was once seen as ambitious but now feels like the new normal. The real question investors are grappling with isn’t whether the market will keep moving higher, but how much further it can realistically go.

The 7,500 Target: Ambitious but Not Impossible

Will tech stocks continue to rise in 2026? Most large investment firms, including J.P. Morgan and UBS, aren’t dismissing the possibility. A move to 7,500 represents roughly 10% upside—a respectable return, but hardly the 20%+ gains we witnessed in 2023-2024 or the projected 15%+ return for 2025.

What makes this target credible isn’t wishful thinking. It’s grounded in three shifts: stronger-than-expected corporate earnings, monetary easing from the Federal Reserve, and emerging evidence that AI might actually deliver tangible productivity improvements. The real question is whether these tailwinds can persist.

Why Tech Dominance Remains the Market’s Engine

Today’s S&P 500 isn’t a balanced index—it’s increasingly a reflection of mega-cap tech giants. For the index to reach 7,500, one condition must hold: tech powerhouses must outperform again.

The setup supports this possibility. The concentration we’re seeing isn’t accidental. The largest firms have earned their positions through superior returns on invested capital, dominant platforms, network effects, and unmatched innovation capacity. Whether you call this structural strength or fragility depends on your perspective, but the data tells the story: mega-cap tech is carrying the market, and if it falters, the entire index struggles.

This became apparent on January 27, 2025, when Nvidia alone lost nearly $600 billion in market value in a single day—the largest drop in U.S. history. That matters because Nvidia now represents over 7% of the S&P 500. Concentration creates momentum, but it also amplifies downside risk.

AI Infrastructure: The Economic Force Reshaping Markets

What separates this cycle from past rallies is the sheer scale of AI investment already underway. We’re not waiting for consumer adoption stories. We’re witnessing a massive supply-side buildout that will precede demand.

Consider this: The Stargate Project alone targets a $500 billion investment in U.S. AI infrastructure over the next four years. This includes:

• Hyperscale data center construction
• Unprecedented semiconductor demand
• Chip supply chain expansion
• Long-term power agreements for energy-intensive facilities
• Global fiber and broadband upgrades

This isn’t theoretical. It’s happening now, rippling across construction, energy, manufacturing, and technology sectors. Once consumer and enterprise demand catches up with this supply, the earnings impact could dwarf current expectations.

The Macro Backdrop: Finally Aligned With Equity Growth

The economic environment has shifted dramatically from where it stood two years ago. Economists spent 2023-2024 predicting recession. Instead, inflation gradually eased, the labor market remained stable, and growth persisted.

The result is an ideal setup: no inflation overheating, steady demand, and credit flowing. The Federal Reserve has already implemented three rate cuts in 2025, with more likely in 2026. Lower interest rates reduce discount rates, support higher valuations, lower debt servicing costs, and encourage investment spending. This environment typically favors equity performance.

That said, the Fed’s reasoning deserves scrutiny. Core PCE sits at 2.8%, still 0.8 percentage points above the Fed’s target. The central bank is cutting because of labor market concerns, not because inflation is conquered. Lower rates can fuel spending, and more spending can reignite price pressures.

Valuations: Expensive, But Context Matters

The S&P 500 trades at forward P/E multiples in the low-to-mid 20s. That’s elevated compared to historical averages, but far less alarming when viewed within technological transformation periods.

In the mid-1990s, forward multiples rose not because markets were irrational, but because companies were becoming materially more profitable as digital technologies reshaped costs. Today’s situation mirrors this dynamic. If AI genuinely drives a new productivity regime, then earnings could expand faster than traditional models assume. What appears expensive today could look fair, even undervalued, within a few years.

Importantly, valuations are relative, not absolute. Investors willingly pay more for future earnings when alternative assets offer weak real returns. Tech stocks benefit disproportionately from lower discount rates since their cash flows extend far into the future.

However, elevated valuations leave limited margin for error. Significant earnings disappointments, inflation reacceleration, or monetary policy shifts could compress multiples rapidly. The bull case hinges on earnings growth and AI-driven margin expansion.

The Bull Case: How 7,500 Becomes Reality

Several dynamics could propel the S&P 500 toward this target:

AI Monetization is gaining real traction. Until recently, AI’s economic benefits remained theoretical. Now they’re materializing: cloud services with premium pricing, enterprise automation, AI-enhanced advertising, personalized products, and automated software development. If revenue grows while costs fall, margins expand and earnings follow.

Productivity gains are boosting profitability. Companies deploy AI to automate tasks, accelerate customer service, reduce hiring needs, optimize supply chains, and improve quality. Margin expansion driven by efficiency could meaningfully lift index earnings.

Fed easing creates multiple expansion. Falling rates make equities attractive relative to bonds. Cheaper borrowing costs incentivize tech companies to make larger AI infrastructure investments, fueling growth.

Consumer spending remains resilient. Despite inflation fears, household finances have held better than expected. Real wages are growing, employment hasn’t collapsed, and consumers continue spending. This supports earnings growth.

Technical momentum amplifies gains. Once uptrends establish, systematic strategies (CTAs, risk-parity funds, volatility-targeting) can accelerate gains, creating self-reinforcing market moves.

The Bear Case: Risks That Could Derail 7,500

Significant headwinds could prevent the index from reaching this target:

AI investment could decelerate. If cloud providers slow expansion, chip supply catches up, ROI takes longer to materialize, energy costs rise, or regulatory concerns intensify, infrastructure spending could cool significantly.

Mega-cap earnings expectations are stretched. When valuations are rich, even modest disappointments hurt. A single earnings miss from a major tech company could weigh heavily on index performance given current concentration.

Inflation could resurge. This remains the wildcard. Any price acceleration could force the Fed to pause or reverse rate cuts, removing a key market support.

Recession risks loom. Softening wage growth and slowing job creation could trigger economic contraction, dampening equity returns and potentially keeping the S&P 500 well below 7,500.

Geopolitical volatility persists. Energy shocks, elections, trade disruptions, or international conflicts could create severe volatility. Fighting in Eastern Europe continues with no clear resolution, and Middle East tensions remain elevated.

Concentration transforms into fragility. The very dynamic driving gains—tech dominance—becomes a liability if mega-caps stumble. A cascading decline among large tech stocks could pull the entire index down sharply.

What Most Likely Actually Happens

Most market outcomes fall between bull and bear extremes. A realistic 2026 scenario might look like:

• Modest returns (5-8%)
• Stable but elevated valuations
• Periodic volatility spikes
• Gradual earnings growth

This wouldn’t reach 7,500, but it wouldn’t derail long-term wealth creation either.

Investment Strategy: Positioning for Uncertainty

Regardless of your outlook, several practical moves merit consideration:

Reassess tech exposure carefully. Being overweight tech doesn’t automatically mean over-risked. Evaluate concentration, correlations, and your drawdown tolerance. Many investors are tech-heavy without realizing it.

Explore small and mid-cap opportunities. SMIDs historically outperform during easing cycles and currently trade at significant valuation discounts relative to mega-cap peers.

Consider international diversification. Non-U.S. equities offer portfolio diversification and trade at lower multiples than U.S. counterparts.

Implement volatility management. As markets become increasingly narrative-driven, hedging strategies, disciplined rebalancing, and tactical cash allocation become more valuable.

Final Verdict: Will Tech Stocks Keep Pushing Higher?

Is 7,500 achievable in 2026? Yes—but not guaranteed.

The most honest forecast lies between extremes. The ceiling is higher than pessimists admit, the floor is lower than many fear. The outcome depends largely on whether AI becomes a real economic engine rather than a futuristic promise that never materializes.

One certainty: 2026 will be defined by technology, productivity, and the tension between ambition and caution. Will tech stocks continue to rise? Probably, but in measured fashion. The index could reach 7,500, but it’s equally likely the S&P 500 finishes somewhere between 6,900 and 7,200. Neither outcome would be surprising.

What matters most is alignment: if AI productivity gains prove real and earnings follow, valuations remain justified and tech stocks maintain leadership, then higher prices follow naturally. If any of these conditions break down, the market stalls. That tug-of-war will define 2026.