HSBC raises year-end 2025 S&P 500 target

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Investing.com -- HSBC said Tuesday that it has lifted its year-end 2025 target for the S&P 500 to 6,400, citing stronger-than-expected earnings and reduced policy uncertainty. 

The bank said the upgrade reflects “earnings surprise to the upside and policy uncertainty eases.”

The bank’s base case assumes 2025 earnings growth of 9%, up from 6% previously. “A moderate slowdown to 8% y-o-y growth in 2H” is expected as tariffs weigh on profits, but ongoing strength in technology should help offset the drag, HSBC said.

Two competing forces are driving the U.S. equity market, according to HSBC: AI optimism and policy shifts. 

“The AI trade is powering the tech/AI cohort higher… while reduced policy uncertainty (namely tariffs) is fueling the ‘rest’ of the market.” 

HSBC noted that tech outperformance is grounded in fundamentals, with earnings growth tracking around 20% for 2025 and revisions moving higher.

In a bullish scenario, HSBC sees the S&P 500 reaching 7,000, assuming “AI adoption accelerates” and suppliers absorb most of the tariff costs. 

In that case, earnings per share could grow 14%, driven by tech strength and a broader market re-rating on clearer AI benefits.

Conversely, HSBC’s bear case puts the S&P 500 at 5,700 if tariffs hit harder than expected, pushing inflation higher and limiting monetary easing. 

“Corporates struggle to pass on higher tariffs… while the higher rates for longer narrative caps valuations,” they wrote.

HSBC expressed greater confidence in the AI-driven rally than in further relief on tariffs, citing “continued capex investments” and “high ROEs” as reasons the trade could have staying power.