- The S&P 500 surged 16% across April and May — a two-month performance matched only four other times since 1950, with the index higher six months later each time by a median 17%, per Dow Jones Market Data
- Micron has increased roughly 10-fold in value over 12 months to a $1 trillion market cap; Samsung is up ~465% in South Korea; the SOX just posted its strongest first-100-trading-day start on record
- Goldman Sachs raised its year-end S&P 500 target to 8,000 from 7,600, implying a further 5.5% gain on top of an already 11% YTD advance; S&P 500 companies trade at ~22.5x forward earnings — slightly cheaper than January because earnings estimates have risen faster than prices
- The biggest threat to the rally: inflation running hotter than expected, driven by Iran war energy disruption and AI hardware demand — a Fed rate hike scenario could push the 10-year Treasury back toward 5% and create significant volatility
What Happened?
The S&P 500 just completed one of the most extraordinary two-month stretches in post-war market history, rising 16% across April and May on the back of blockbuster earnings from chip companies and growing conviction that the AI buildout is the real deal. The PHLX Semiconductor Index posted its best first-100-trading-day start ever. Micron has risen roughly 10x in twelve months, breaching a $1 trillion market cap. Samsung is up 465% in Seoul. Intel — which hasn’t set a record since 2000 — has tripled in 2026. Goldman Sachs responded by raising its year-end S&P 500 target to 8,000. The index has now logged nine consecutive weekly gains, the longest such streak since 2023. Hedge funds have been buying at the fastest pace in six months, and fund managers have slashed cash to deploy into equities.
Why It Matters?
The rally is more than sentiment — it has fundamental underpinning. Analysts estimate 75-80% of the two-month gain reflects genuine earnings surprise and credible hopes for Iran ceasefire. Anthropic just posted its first operating profit. AI coding tools are generating real enterprise revenue. The fear of AI monetization failure — which haunted markets in 2024 — has been replaced by fear of missing the next leg up. But history also offers a warning: the late 1990s chip and tech rally looked equally justified at each stage, until it didn’t. George Vanderheiden shunned tech in 1996, missed a tripling of the Nasdaq, and retired in disgrace. The lesson the market has internalized: the cost of being early in calling a bubble is indistinguishable from being wrong about it entirely.
What’s Next?
Goldman’s 8,000 target implies modest additional upside from current levels — Wall Street is not predicting a blowoff. The key variable is inflation: consumer prices are rising faster than expected, driven by energy disruption from the Iran war and overwhelming demand for AI memory chips. If the Fed under Kevin Warsh pivots hawkish — even with a hint of a rate hike — the 10-year Treasury could push back toward 5%, which would put pressure on the 22.5x forward multiple the market is currently paying. An Iran ceasefire that reopens Hormuz would take the oil risk premium off the table and give the rally fresh fuel. Until then, momentum is the dominant force, and as Alan Greenspan learned in 1996, irrational exuberance can run for years before it corrects.
Source: The Wall Street Journal
