Top 10 contributors to S&P 500 earnings growth (SPY:NYSEARCA)

Goldman Sachs anticipates a 22% rise in S&P 500 earnings for the second quarter, citing steady economic expansion and heavy artificial-intelligence investment as the main drivers, according to a client note. That forecast is above the consensus view of about 19% growth.

Ten companies account for most of the index-level profit growth, the bank said. The list tilts heavily toward mega-cap names with large cloud and AI businesses. Recent quarterly reports from Microsoft, Amazon and Alphabet show accelerated spending on data centers and AI hardware, a pattern that has come to define this earnings cycle.

The narrow base of the rally has been a recurring concern for S&P 500 bears. The profit data so far suggests those leaders are delivering the revenue and margins to support the valuation. The first quarter delivered roughly 10% earnings growth for the index. The acceleration to 22% in Q2 reflects both the AI spending cycle and a favorable year-over-year comparison for some energy and materials names, the note said.

Goldman's economics team expects U.S. gross domestic product to expand at roughly a 2.5% annualized rate in the second quarter. That macro backdrop, combined with corporate cost discipline and the AI capex cycle, gives the bank confidence in its above-consensus estimate.

The biggest risk to the Q2 outlook is margin compression if wage growth outpaces pricing power, the analysts said. So far the operating-leverage story is intact for the tech-heavy names. Broader industrial and consumer-staple companies face a tighter trade-off.

For the full year, Goldman expects S&P 500 earnings per share of $220. That implies roughly 15% growth from 2023. The forecast assumes the rate-cutting cycle starts by year-end. It does not require aggressive easing to hit the number.

The index has rallied about 12% year to date. Much of the earnings optimism is priced in. Several traders said any Q2 misses from the AI leaders could expose the rest of the index to a valuation reset. The consensus view is that the top contributors will deliver strong results. Traders said that view is not fully priced in.

Earnings season typically kicks off in mid-July with the big banks.

AlphaScala's quantitative model assigns the SPY an Alpha Score of 38 out of 100, a mixed label. The full analysis is available on the SPY stock page.