A big reason why US stocks have been so strong this year: Earnings are growing

US stocks' strength since April is being driven by rising earnings estimates rather than the usual early-year downgrades, supporting the S&P 500 rally as earnings season unfolds (42% of the index reporting this week). JP Morgan highlights three drivers: an AI capex super-cycle boosting revenue and margins for semiconductors and infrastructure (notably tied to Oracle, Micron and Nvidia), large tax provisions from the July 2025 “One Big Beautiful Bill Act” that restore 100% bonus depreciation and immediate R&D expensing, and improving earnings breadth across Industrials, Financials and Materials. Hyperscaler capex is tracking toward roughly $775 billion for 2026, and Morgan Stanley estimates the tax changes could lift hyperscaler free cash flow by about $30 billion in 2026. JP Morgan now forecasts 2026 S&P EPS of $330 (up from $315). The combination of stronger-than-expected earnings revisions and margin strength helps explain the market's robust performance and underpins a bullish outlook for US equities.