(Bloomberg) -- The frenzy around AI stocks has blindsided Wall Street forecasters, spurring a race among strategists to keep up with a stock market rally that's already blowing past their expectations when 2024 began.Five Wall Street firms have already lifted their forecasts for the S&P 500 Index, which is up a 7% to start the year after rising 24% in 2023. In the past week alone, Piper Sandler & Co., UBS Group AG and Barclays Plc boosted their targets. Two firms — Goldman Sachs Group and UBS — have done it twice since December. “I've been doing the strategy job for about 20 years, and this is the first time I've ever done something like that,” said Jonathan Golub, UBS Investment Bank's chief US equity strategist. His second revision to his 2024 target, raising it to 5,400, ties him with Yardeni Research's Ed Yardeni for the highest among the 25 sell-side strategists tracked by Bloomberg.At 5,096.27, the index is already beating the average year-end forecast of 4,899.40, a figure it eclipsed just 24 days into 2024. Even the loftiest calls of 5,400 are just another 6% away.It's reminiscent of last year, when the S&P 500's surprising strength also caught Wall Street prognosticators off guard. The difference is in 2023 they held off until the summer to start adjusting their outlooks — in 2024 they aren't waiting that long.Read more: Wall Street's Best and Brightest Flopped Once Again in 2023The reason for this rally is familiar to investors: Big Tech dominance. The twist is it's now tied to artificial intelligence technology and its potential to transform the global economy. As a result the so-called Magnificent Seven tech stocks, particularly Nvidia Corp., Meta Platforms Inc. and Microsoft Corp., are racing ahead and dragging the major indexes with them.Converting SkepticsSo far, their financial results are justifying the moves. Earnings per share for the Magnificent Seven companies rose a combined 59% in the fourth quarter from a year earlier, compared with expectations of 47%, data compiled by Bloomberg Intelligence show. Even some of the biggest skeptics are becoming believers. Piper Sandler's Michael Kantrowitz, who last year had the most bearish US stock outlook on Wall Street, last week lifted his S&P 500 forecast to 5,250, surpassing calls from some ever-bullish peers. Then there's HSBC's Max Kettner, who was correctly optimistic through most of last year. This week, he told clients his team was “wrong” last month to downgrade its view on US stocks. He said the group failed to predict the AI rally.Economic strength in the face of the Federal Reserve signals that it will keep interest rates higher for longer than had been expected has been the big surprise to many strategists. Economists see a 40% chance of a recession in the next year — the lowest level since 2022. That figure was 65% in the first half of 2023. “This period of what we are watching is quite different and unique compared to historical experiences,” Venu Krishna, Barclays' head of US equity strategy, said.Read more: Recession Odds Dropping as Economists Boost US Growth OutlookThat said, all of this optimism is making some of the staunchest bulls uncomfortable. John Stoltzfus, chief investment strategist at Oppenheimer Asset Management, is waiting until the S&P 500 hits his 5,200 year-end target before he considers lifting it. His concern is that bears have capitulated at an “extraordinary rate,” creating a swing that may not be sustainable. ‘Egregiously Expensive'“It's the old FOMO, the fear of missing out,” Stoltzfus said. “And there's probably an element of YOLO — you only live once — from the momentum drive that we've seen since October.”Savita Subramanian, the Bank of America Corp. strategist who was hailed for quickly adjusting her view as the 2023 rally got going, is sticking to her year-end call of 5,000, writing in a note on Wednesday that it was “hard to be bullish based on valuations.” The S&P 500 is “egregiously expensive, with a price-to-trailing-earnings ratio in the 95th percentile in data going back to 1900,” she said, while also acknowledging the challenge of comparing current measures of value to those from prior eras.Read more: JPMorgan's Kolanovic Says Profits Peaking, Earnings Snag AheadFor now, however, it all makes sense, even as some naysayers dismiss the gains as a result of sentiment, fund flows and positioning.For UBS's Golub, it's justified by fundamentals like solid earnings and economic strength.“What's going to have to happen,” he said, “is that these strategists who put forecasts out are going to have to ask themselves, ‘Can I justify a call that the market is going to fall in an environment where recession risk is declining and the earnings revisions are extremely healthy?'”--With assistance from Lu Wang.More stories like this are available on bloomberg.com©2024 Bloomberg L.P.