NVIDIA’s 106% revenue growth and Broadcom’s 221% AI revenue surge show the cycle’s scale, but both depend on a few hyperscalers choosing to keep spending.
SPY trades near highs with a compressed 19x P/E, but Snider warns half of S&P 500 earnings growth runs through one AI capex cycle.
Goldman’s positioning indicator is at its lowest since March, offering a selloff cushion, but September seasonality and the upcoming CPI report add near-term risk.
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Goldman Sachs chief U.S. equity strategist Ben Snider went on CNBC’s Squawk on the Street with a statistic often quoted as a bull point. He said AI investment spending is driving about half of S&P 500 earnings growth, according to Goldman Sachs. Read the other way, index profit growth leans heavily on one capital spending cycle run by a small group of buyers.
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NVIDIA (NASDAQ:NVDA), Broadcom (NASDAQ:AVGO), and Microsoft (NASDAQ:MSFT) sit at the center of that cycle. The SPDR S&P 500 ETF Trust (NYSEARCA:SPY) closed at 757.94 on September 10, still up 11.13% year to date despite a recent pullback. The setup is a market near a high, a compressed multiple, and earnings growth concentrated in a spending cycle that could bend if any of those buyers pulled back.
Earnings, Not Multiples, Carry the Index
Snider said at the start of the year the S&P 500 traded at 22x earnings and is now at 19x, with the index near a high. Earnings grew faster than price, so the multiple compressed while stocks kept rising.
A price-to-earnings multiple is what you pay per dollar of profit. A falling multiple alongside a rising index is a healthier setup than the reverse, because the gains are backed by realized earnings rather than a re-rating.
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Snider added rate context: a year ago the ten-year Treasury was close to 4%, and the S&P 500 was trading around 6600. The ten-year now sits at 4.83%, ranked at the 99.6th percentile of the past year.
His argument is that yields matter less than volatility, and the earnings backdrop is still very strong. That holds so long as profits keep expanding at the current pace.
Concentration Inside the Bull Case
If AI capex is funding half of index earnings growth, then a handful of hyperscalers deciding to keep spending is what keeps the average up. NVIDIA posted Q2 FY27 revenue of $96.22 billion, up 105.8% year over year, with data center at $89.02 billion, per the Q2 FY27 release filed with the SEC.
Broadcom’s AI semiconductor revenue reached $16.70 billion in Q3, up 221% year over year, with a Q4 outlook of $21.7 billion. Microsoft is on the buyer side, with full-year capex of $115.95 billion and an FY27 capex expectation of roughly $175 billion.
The circularity is real. NVIDIA is offering take-or-pay commitments and selective credit enhancement to neoclouds and frontier labs, while partnering with Apollo, BlackRock, Blackstone, Brookfield, Goldman Sachs, and KKR to mobilize over $500 billion in third-party capital for AI infrastructure.
Capital spending is discretionary and can be cut quickly. If two or three of these buyers slowed, the earnings growth Snider is describing thins out fast, and the index earnings math changes with it. The suppliers that keep getting paid regardless of which hyperscaler leads the buildout, from power to cooling to networking, are worth a closer look (we profiled seven of them in a free report you can grab here).
Broadening Demand, Positioning, and Seasonality
Snider said enterprise AI spending has accelerated beyond infrastructure over the last several months, after four years of the story being mostly about infrastructure. Microsoft supports that read: 365 Copilot reached over 30 million paid seats, and commercial remaining performance obligations grew 84% to $678 billion.
Most S&P 500 companies continue to leave AI-driven earnings accretion out of their reported figures, so the broadening shows up in demand commentary while remaining largely narrative in reported profit.
Snider said Goldman’s positioning indicator, which combines hedge funds, mutual funds, and other investors, is at its lowest level since March, even with the market near a high. Light positioning cushions a selloff because less crowded exposure has less to unwind.
September seasonality is usually weak, more so in a midterm year, and the VIX has drifted up to 16.46. The next CPI release and the Federal Reserve are worth close attention, with the target rate sitting at 3.75%.
Is SPY a Buy, Hold, or Sell?
The case for owning the S&P 500 rests on earnings still growing at a pace that supports the price. But that growth is concentrated: if AI capex slows, roughly half of the growth Snider identified slows with it.
The setup for SPY looks balanced rather than compelling here, with the ten-year at 4.83%, positioning already thin, and the September seasonality Snider flagged still ahead.
Staging fresh capital over several months, rather than a single lump ahead of the next CPI release and the Fed decision, is worth researching against your own timeline. If broadening enterprise AI spending shows up in reported earnings from companies outside the top handful, the concentration risk fades, and the setup improves.
Until then, a small group of buyers and suppliers is carrying the index, and their spending plans deserve close reading each quarter. For anyone researching the index, the reality that half the growth story runs through three names deserves weight in the analysis.
You should also keep Middle East volatility in mind. Unless that resolves and oil prices come down, it’s hard to rate the SPY anything above a Hold.
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