UBS's revised target implies the bank sees room for further multiple expansion even as earnings catch up, rather than a market that's already priced for perfection. The call that profits, not valuation, will drive the next leg higher marks a shift in framing for a market that's spent much of the year focused on rate and geopolitical risk. Flagging capex and demand spreading beyond big technology names suggests UBS sees the AI cycle broadening rather than narrowing, a distinction that matters for sector positioning. The bank's comment that markets are already pricing in slower growth or higher rates implies UBS sees more room for upside surprises than the consensus is currently allowing for.---UBS says Wall Street is still underpricing just how strong this earnings cycle is going to be.Summary:UBS raised its S&P 500 year-end target to 8,100 from 7,500, implying gains of more than 8% from current levels near 7,440.The bank expects S&P 500 profit growth above 28% this year, above market consensus, with semiconductor companies as a major driver.UBS said improving profits could lower the market's overall valuation multiple, leaving stocks trading below fair value.The bank pointed to capital expenditure and demand extending beyond the technology sector as support for continued gains.UBS said the index could reach 8,900 by 2027.The bank said markets have already absorbed much of the pressure from the US-Iran war and Trump administration policy uncertainty, and sees an attractive risk-reward setup for equities despite lingering geopolitical and rate risks.UBS has raised its year end target for the S&P 500 to 8,100 from 7,500, arguing that a stronger corporate profit outlook justifies a more bullish view on US equities despite recent market volatility. The new target implies gains of more than 8 percent from current levels near 7,440, with the bank saying investors are still underestimating the scale of an earnings driven rally.A UBS strategist said the firm expects S&P 500 profit growth of more than 28 percent this year, well above market consensus, with semiconductor companies acting as a major driver as they build backlogs to keep pace with demand. The bank argued that improving profits could ultimately lower the market's overall valuation multiple, leaving stocks trading below fair value even after recent gains. UBS also pointed to signs of broader capital expenditure and demand extending beyond the technology sector, reinforcing its conviction that technology led, broad based earnings can offset ongoing geopolitical and macroeconomic risks.Looking further out, UBS said the index could reach 8,900 by 2027, underscoring its view that the current AI investment cycle has further room to run. The strategist said the firm remains constructive on US equities because technology led earnings growth continues to support further upside, and that the extension of capital spending and demand beyond big technology names strengthens the case for continued market gains.On risks, UBS acknowledged that recent trading has been pressured by escalating hostilities in the Middle East and an uncertain macroeconomic backdrop, but said the market has already absorbed much of the maximum pressure stemming from the US Iran war and policy uncertainty linked to the Trump administration. The bank said markets appear to be pricing in slower growth, lower margins or higher rates even as earnings revisions, profitability and long term growth expectations continue to improve.UBS added that geopolitical tensions, interest rates and risks tied to artificial intelligence investment still threaten pullbacks in the near term, but said it sees an attractive risk reward setup for equities in the coming months and into next year. Taken together, the bank's updated targets reflect a view that earnings strength, rather than valuation expansion alone, will remain the primary driver of further gains for US stocks. This article was written by Eamonn Sheridan at investinglive.com.