Can the S&P 500 really surge 42% by 2025?

Some analysts believe the leading US shares index still has a long way to go.

a couple look dumbfounded with exaggerated looks of surpirse on their faces as te mman holds a phone in his hand.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Over in the United States of America, investors would be feeling pretty comfortable right about now, I'd wager. That's because the flagship index of American stocks  – the S&P 500 Index (INDEXSP: .INX) – has had an absolutely stonking year.

The S&P 500 began 2023 sitting at around 3,824 points. But, as of last night, it had closed at 4,565.72 points. That's a rise worth an astonishing 19.39%. For some context, the S&P 500 retreated by around 20% during 2022. So it's been a rather marvellous recovery for US shares this year.

These impressive gains have almost single-handedly been driven by the 'magnificent seven' – US tech giants that we all know and whose products or services most of us probably use at least weekly, if not daily.

These seven winners consist of Apple Inc (NASDAQ: AAPL), Microsoft Corporation (NASDAQ: MSFT), Amazon.com Inc (NASDAQ: AMZN), Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL), Meta Platforms Inc (NASDAQ: META), NVIDIA Corporation (NASDAQ: NVDA), and last but not least, Tesla Inc (NASDAQ: TSLA).

Most of these S&P 500 tech stocks have seen monstrous gains in 2023 so far. Chief amongst them is semiconductor titan Nvidia, which has seen its shares rise by a whopping 228.86% year to date. But the likes of Apple, Amazon, and Meta have all still seen a share price rise of more than 50%.

After a spectacular run like this, many investors might be wondering whether there is still any gas left in the tank here. Maybe it's a good time to take some profits off the table and sell up?

Is it time to sell out of the S&P 500 and the magnificent seven?

Well, that would be a big mistake, according to several US market analysts. As reported by our Foolish colleagues across the Pacific, analysts at Goldman Sachs reckon the S&P 500 is still "undervalued". And it's all thanks to the potential of artificial intelligence (AI).

The 'magnificent seven' are all major players in AI, with Nvidia and Microsoft in particular at the vanguard.

It's not just Goldman that thinks AI could power the S&P 500 market higher either. Consultancy firm Capital Economics has recently given the S&P 500 a 2025 price target of 6,500. If realised, that would see the flagship US index harness the AI boom to rise another 42% from its current level.

And ARK Invest's Cathy Wood has estimated that revenue from AI software could "increase at 42% annually to reach $14 trillion by 2030", helping to unlock new heights for the companies that harness it.

So it's exciting times to be investing in US tech stocks to be sure. Let's wait and see if AI can truly drive the S&P 500 to rise by another 42% over the next few years.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Motley Fool contributor Sebastian Bowen has positions in Alphabet, Amazon.com, Apple, Meta Platforms, Microsoft, and Tesla. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon.com, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool Australia has recommended Alphabet, Amazon.com, Apple, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on International Stock News

A woman is left blank after being asked a question, she doesn't know the answer.
International Stock News

Insiders are selling Nvidia stock. Should you?

When a company's executives and board members sell their shares, it can raise concerns. But Nvidia's insider sales don't appear…

Read more »

A white and black robot in the form of a human being stands in front of a green graphic holding a laptop and discussing robotics and automation ASX shares
International Stock News

Nvidia jumped 27% after its stock split announcement. Can Broadcom beat it?

Following in Nvidia's footsteps, Broadcom is doing a 10-for-1 stock split.

Read more »

a man with a wide, eager smile on his face holds up three fingers.
International Stock News

3 reasons to buy Nvidia like there's no tomorrow (Hint: The stock split Isn't 1 of them)

The GPU leader's shares could head even higher in the coming months and years.

Read more »

A white and black clock face is shown with three hands saying Time to Buy reflecting Citi's view that it's time to buy ASX 200 banks
International Stock News

5 Reasons Nvidia isn't in an AI-fueled bubble

Nvidia's shares may actually be cheap.

Read more »

A woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computer
International Stock News

2 reasons to buy Nvidia after the stock split (and 1 reason to sell)

This tech giant is riding a tidal wave of AI-related demand. But is it too late for new investors to…

Read more »

Smiling man working on his laptop.
International Stock News

Which 'other' US AI stock is soaring this week?

This US AI stock is following Nvidia's footsteps in more than one way.

Read more »

Legendary share market investing expert and owner of Berkshire Hathaway Warren Buffett
International Stock News

Warren Buffett meets AI: Is Berkshire Hathaway prepared for technological disruption?

Berkshire Hathaway's portfolio may contain underappreciated AI-associated risks.

Read more »

A man looking at his laptop and thinking.
International Stock News

Nvidia stock is still a great buy — but when should investors sell shares?

Here are three solid reasons for investors to consider selling shares of the artificial intelligence (AI) chip leader.

Read more »