Omor Ibne Ehsan
6 min read
Quick Read
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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.
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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.
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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.
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.
