The S&P 500’s record-setting run has prompted major investment banks to recalibrate their outlooks, with both Barclays and Deutsche Bank raising their year-end targets.

On Wednesday, Deutsche Bank lifted its forecast to 7,000 from 6,550, while Barclays moved its projection to 6,450 from 6,050. The upgrades underscore the market’s resilience, which has been fueled by stronger-than-expected corporate earnings, sturdy U.S. economic growth, and investor enthusiasm surrounding artificial intelligence.

The index climbed to an all-time high of 6,555.97 earlier in the day and has already risen 11.2% this year, buoyed by a rally that has lifted stocks more than 30% from their April lows. Both banks’ revisions add to a growing chorus of Wall Street firms that have raised their outlook despite persistent worries over President Donald Trump’s tariff policies and the risks they pose to both corporate profits and broader economic momentum.

“We expect equity valuations to remain elevated by historical standards, driven by higher payout ratios, perceptions of higher trend earnings growth…and earnings resilience with fewer significant drawdowns,” said Binky Chadha, chief global strategist at Deutsche Bank.

Barclays echoed that sentiment but injected a note of caution, saying, “Corporate earnings are solid and global GDP growth is stabilizing, but U.S. labor market risks are worsening.”

Fresh labor market data released Friday showed U.S. job growth weakening sharply in August, with the unemployment rate rising to 4.3%, its highest in nearly four years. Those figures, combined with tame inflation readings, have heightened expectations of Federal Reserve rate cuts, a factor that could continue to buoy equities. Barclays is betting on three rate cuts before year-end, which it argues would help offset labor market weakness. In addition to its year-end revision, Barclays also raised its 2026 target for the S&P 500 to 7,000 from 6,700.

For investors, the debate now shifts toward what 2026 might hold. Analysts see two sharply divergent scenarios.

In the best case, the AI-driven productivity boom continues to spread beyond big tech into manufacturing, healthcare, and financial services, fueling a broad-based rise in earnings. If Federal Reserve rate cuts succeed in engineering a soft landing—stabilizing growth without triggering a deeper labor market shock—the S&P 500 could not only meet but surpass Barclays’ 7,000 forecast. Under this trajectory, equity valuations would remain elevated, supported by strong global GDP growth and an environment where corporate payout ratios stay high.

The worst-case, however, casts a more fragile picture. If Trump’s tariffs intensify and escalate into broader trade conflicts, corporate margins could erode even as input costs climb. A more pronounced downturn in the U.S. labor market could sap consumer demand, forcing companies to cut back on hiring and investment.

Combined with the risk of a policy misstep by the Fed—either cutting rates too late or too aggressively—the S&P 500 could falter, erasing much of its recent rally and sinking well below current levels. In such a scenario, today’s optimism around AI could prove to be overstated, leading to painful corrections in valuations.

All eyes now turn to the Fed’s policy meeting next week, where investors hope to glean clues on the trajectory of rate cuts and the broader market direction. For now, Wall Street banks remain broadly bullish, betting that resilient earnings and AI momentum will keep the S&P 500 elevated.

But with job growth slowing and political risks simmering, 2026 could yet test how durable this record-setting rally really is.

Quantum computing startup PsiQuantum has raised $1 billion in a Series E funding round at a valuation of $7 billion, marking one of the largest financing hauls ever in the quantum sector.

The Palo Alto-based company also announced a strategic collaboration with Nvidia to accelerate development of its silicon-photonics quantum machines.

The fundraising was led by BlackRock, Temasek, and Baillie Gifford, with participation from NVentures (Nvidia’s venture capital arm), Macquarie Capital, and Ribbit Capital. PsiQuantum said the fresh capital will support its Brisbane, Australia, and Chicago, Illinois, sites while funding the rollout of large test systems to prove the company’s design.

PsiQuantum is pursuing a photonic approach to quantum computing, manipulating particles of light on silicon chips. The company argues this method offers a clearer path to scaling, leveraging semiconductor manufacturing techniques and fiber-optic networking.

As part of its Nvidia partnership, PsiQuantum will integrate its systems with the chipmaker’s advanced processors. The collaboration aims to make Nvidia’s chips interoperable with quantum machines, while simultaneously advancing PsiQuantum’s light-based silicon-photonics chips.

The startup’s long-term ambition is nothing short of building the world’s first million-qubit, fault-tolerant quantum computer — a scale far beyond today’s experimental systems, which typically operate with hundreds of qubits and struggle with high error rates. To achieve this, PsiQuantum has also partnered with GlobalFoundries, which fabricates its chips at the company’s New York factory.

Contrast with Industry Peers

PsiQuantum’s $7 billion valuation positions it as one of the most valuable quantum startups globally. It also underscores the widening gulf between well-capitalized players and smaller rivals. For example, U.S.-based IonQ, which went public via SPAC in 2021, has a market capitalization hovering around $2 billion and raised significantly less than PsiQuantum in its early rounds. Rigetti Computing, another U.S. quantum hopeful, has struggled with both financing and execution, with a market cap under $200 million as of this year.

By contrast, PsiQuantum’s latest funding round rivals levels more commonly seen in AI hardware. Nvidia itself, whose data center sales hit $41.1 billion in its most recent quarter, is flush with cash and continues to dominate AI chip markets. Anthropic, one of the leaders in AI models, raised $4 billion from Amazon in 2023, but in quantum computing, a single $1 billion round is rare and signals how investors view the technology as strategically important despite its longer time horizons.

Government Stakes in Quantum

For governments and investors, quantum represents both an economic opportunity and a matter of national security. Quantum systems could eventually crack today’s encryption, model new materials, and revolutionize drug discovery. Unlike the gradual slowdown in conventional computing, quantum offers the promise of leaps in processing power.

Currently, governments are pouring billions into quantum research. In the United States, the 2018 National Quantum Initiative Act allocated over $1.2 billion in funding for quantum R&D, with additional billions committed through the Department of Energy and Department of Defense for quantum-secure communication and computing.

In China, state-led investments dwarf private rounds, with analysts estimating more than $10 billion committed to national quantum programs, including facilities in Hefei focused on quantum communication and computing. The country has already demonstrated leadership in quantum satellite communication and has sought to tie advances to strategic military and industrial applications.

The European Union has launched the Quantum Flagship Program, a €1 billion, 10-year initiative to boost the bloc’s competitiveness, funding university labs, startups, and collaborative projects across member states. Several European governments, including Germany and France, have also announced national programs worth billions more to accelerate industrial adoption of quantum technology.

This dual-track strategy — large state-backed initiatives alongside deep-pocketed private investors — highlights how quantum is being treated as both a commercial frontier and a geopolitical race. PsiQuantum’s $1 billion raise signals that private capital is willing to match some of the scale governments are already deploying, especially when tied to heavyweight partners like Nvidia.

By securing Nvidia’s backing, PsiQuantum is ensuring that its photonic design remains tethered to the world’s dominant chip ecosystem, potentially smoothing the path to commercialization.

With more than 30 investors and a newly confirmed $1 billion war chest, PsiQuantum is now among the best-funded deep-tech startups on record. Its success or failure could help determine whether quantum computing shifts from hype to practical reality within the next decade.

Meta Platforms and TikTok have won a significant legal challenge against the European Commission over how Brussels calculated supervisory fees under the Digital Services Act (DSA), the bloc’s landmark content-moderation and platform regulation law.

The Luxembourg-based General Court ruled on Wednesday that EU regulators had employed the incorrect legal mechanism to establish the methodology for the annual supervisory fee imposed on large tech platforms. The court gave the Commission 12 months to reformulate the levy using a delegated act instead of the implementing decisions it had relied on.

Meta and TikTok filed their lawsuits after they were hit with a fee equivalent to 0.05% of their annual worldwide net income. The levy was designed to cover the Commission’s costs of monitoring their compliance with the DSA, which requires “very large online platforms” to take stronger action against illegal and harmful content or risk fines of up to 6% of their global turnover.

Dispute Over Fee Methodology

The supervisory fee is calculated based on two factors: a company’s average monthly active users in the EU and whether it reported a profit or loss in the preceding financial year. Meta and ByteDance’s TikTok argued the system unfairly penalized profitable firms while allowing loss-making rivals with similarly massive user bases to avoid paying altogether, leaving compliant firms shouldering a disproportionate share of the costs.

The General Court agreed that the Commission had erred procedurally.

“That methodology… should have been adopted not in the context of implementing decisions but in a delegated act, in accordance with the rules laid down in the DSA,” the judges wrote.

However, the ruling stopped short of requiring regulators to refund the 2023 fees already paid by Meta and TikTok. The money will remain with the Commission while it drafts a new legal basis for calculating the fee.

The Commission sought to downplay the outcome, emphasizing that the principle of charging supervisory fees — and the amounts involved — remain intact.

“The Court’s ruling requires a purely formal correction on the procedure. We now have 12 months to adopt a delegated act to formalize the fee calculation and adopt new implementing decisions,” a Commission spokesperson said.

TikTok welcomed the judgment.

“We’ll closely follow the development of the delegated act,” a TikTok spokesperson noted.

Meta also issued a measured endorsement, underscoring what it sees as inequities in the current system.

“Currently, companies that record a loss don’t have to pay, even if they have a large user base or represent a greater regulatory burden, leaving others to pay a larger and disproportionate amount of the total. We look forward to the flaws in the methodology being addressed,” a Meta spokesperson said.

Backstory: Why the DSA Introduced Supervisory Fees

The Digital Services Act, which entered into force in November 2022, was one of the EU’s most ambitious regulatory projects since the General Data Protection Regulation (GDPR) of 2018. It was designed to rein in the power of Big Tech platforms and address concerns over illegal trade, hate speech, disinformation, and harmful content circulating online.

To enforce these sweeping obligations, the European Commission needed new financial resources to hire investigators, legal experts, and technical staff. Lawmakers decided that very large online platforms should help fund the system that regulates them, creating the annual supervisory fee as a dedicated revenue stream.

The formula, however, quickly sparked debate. By tying the fee to net global income, the regulation ensured that profitable firms like Meta or TikTok paid more, while loss-making platforms with comparable or even larger user bases — such as X (formerly Twitter) during its turbulent restructuring under Elon Musk — could avoid paying altogether.

That imbalance was precisely what Meta and TikTok challenged in court, arguing that the methodology lacked fairness and transparency.

Wider Implications for Big Tech

The ruling matters not just for Meta and TikTok but for every major online platform falling under the DSA’s scope. Companies required to pay the supervisory fee include Amazon, Apple, Booking.com, Google, Microsoft, X, Snapchat, and Pinterest.

These platforms, classified as “very large online platforms” because of their enormous reach across Europe, face stricter obligations to combat disinformation, monitor illegal transactions, and implement better protections for users. The supervisory fees are meant to fund Brussels’ oversight capacity, ensuring regulators can keep pace with global tech giants.

The cases, filed as T-55/24 (Meta Platforms Ireland v Commission) and T-58/24 (TikTok Technology v Commission), now force the EU executive into a technical rewrite of its fee system. Regulators will need to address not only the legal procedural error identified by the court but also the fairness concerns raised by companies over how costs are distributed.

While Meta and TikTok may have won on legal grounds, the financial impact is limited for now. Both must still shoulder their 2023 fees, and the Commission retains the ability to reimpose similar charges once it reworks its methodology.