University of Kwazulu-Natal

Prediction These 2 Stocks Could Outperform The S P 500 In 2026 Nasdaq

Bonisiwe Shabane
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prediction these 2 stocks could outperform the s p 500 in 2026 nasdaq

Broadcom and Amazon could be set to outperform next year. If you want to outperform the market, you're going to need to find stocks that can outpace the S&P 500. While that may not sound that difficult, J.P. Morgan analysts found that between 1980 and 2020, about two-thirds of stocks in the Russell 3000 Index, which extends the stock universe a bit, underperformed. However, those that outperform often do so by a wide margin. Given that context, let's examine two stocks I believe can outperform next year.

The market right now is being driven by artificial intelligence (AI) stocks, and with spending on data center infrastructure only increasing, I think that trend should continue. One company that looks particularly well-positioned to start capitalizing on this opportunity is Broadcom (AVGO 0.37%). Nvidia has dominated the early innings of AI infrastructure, but as the market starts to turn toward inference and hyperscalers (companies that own large data centers) look to get more bang for their buck... ASICs are pre-programmed chips built for specific purposes, and as such can improve performance and be more energy efficient. They require high upfront costs to develop, but can save companies money over the long run. Daily stocks & crypto headlines, free to your inbox

By continuing, I agree to the Market Data Terms of Service and Privacy Statement Written by Geoffrey Seiler for The Motley Fool-> Growth stocks have been leading the market higher. The Vanguard Growth ETF and the Invesco QQQ Trust are well positioned to once again outperform if this trend continues. With AI still in its early innings, these ETFs are set up to once again outperform in 2026. Megacap technology stocks have been leading the market higher, and the odds of that happening again next year are high.

As such, the Vanguard Growth ETF (NYSEMKT: VUG) and the Invesco QQQ Trust (NASDAQ: QQQ) are both well positioned to once again outperform the S&P 500 in 2026. On January 2, 2020, I made the most prescient call of my 15-year career at Stansberry Research... At the time, stocks were regularly hitting new all-time highs, and many investors were convinced nothing could stop the mega-bull market. That made it a great time to ponder the unthinkable... like something stopping the bull dead in its tracks. To help me get in the right frame of mind, I read President Herbert Hoover's diary of the Great Depression.

I didn't sleep well the next few nights. You see, nearly a century ago, on the eve of the world's greatest financial calamity, investors were ignoring disturbing economic realities. As I put the pieces together and started thinking about the current situation, it suddenly became plain-as-day obvious that investors were once again making the same terrible mistake. I published my thoughts and findings in the first Digest of 2020. Little did I know, the next "unthinkable" event was just a few weeks away... On February 11, 2020, the World Health Organization ("WHO") officially named the disease that would become a worldwide nemesis "COVID-19." Three weeks later, on March 13, the Trump administration declared a national emergency.

Broadcom looks poised to outperform in 2026 as its huge custom AI chip opportunities become closer to reality. After underperforming in 2025, Amazon could be set to rebound in 2026. Amazon is attractively valued, and AWS growth should continue to accelerate. If you want to outperform the market, you're going to need to find stocks that can outpace the S&P 500. While that may not sound that difficult, J.P. Morgan analysts found that between 1980 and 2020, about two-thirds of stocks in the Russell 3000 Index, which extends the stock universe a bit, underperformed.

However, those that outperform often do so by a wide margin. Given that context, let's examine two stocks I believe can outperform next year. Alphabet, Meta, and Arm could easily outperform the S&P 500. Some investors will tell you it's easier to invest in an S&P 500 index fund or exchange-traded fund (ETF) instead of juggling individual stocks. The S&P 500 has generated an average annual return of 10% since its inception in 1957, but 89.5% of all professional funds tracked by SPIVA Scorecards underperformed that index over the past 10 years. That's certainly a prudent strategy for risk-averse investors, but there are still plenty of blue chip growth stocks that could easily outperform the S&P 500 on their own over the next decade.

Let's take a closer look at three of them: Alphabet (GOOG 0.11%) (GOOGL 0.11%), Meta Platforms (META +0.48%), and Arm Holdings (ARM +1.27%). Alphabet's Google owns the world's most popular search engine, the most widely used mobile operating system (Android), the top web browser (Chrome), the biggest webmail service (Gmail), and the largest streaming video platform (YouTube). It also owns the third-largest cloud infrastructure platform (Google Cloud) as well as one of the top cloud-based productivity suites. That sprawling ecosystem accumulates plenty of data to support the growth of its digital ads and its Gemini generative AI platform. Over the next decade, it should continue growing as it deeply integrates those AI tools into its core search, advertising, YouTube, and cloud platforms. Its cloud infrastructure platform should also continue to attract more spending from large companies as they ramp up their spending in cloud-based AI applications.

That growth of those cloud and AI ecosystems should drive its newer projects -- including driverless vehicles and quantum computing -- to become new growth engines in the future. Written by Adam Levy for The Motley Fool-> The S&P 500 has had an incredible run over the last two years. From the start of 2023 through the end of 2024, the benchmark stock index produced a total return of 58%. The bulk of that growth was driven by just a handful of companies. Specifically, the last two years saw the biggest companies get even bigger.

In fact, the top eight components of the S&P 500 have never accounted for a larger percentage of the index. A whopping 35.6% of the index's value is tied to the "Magnificent Seven" stocks and Broadcom. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. See the 10 stocks » To be sure, those companies have seen strong financial results, many driven by advancements in artificial intelligence.

But many large-cap stocks, including a handful of the Magnificent Seven, have seen their prices climb faster than their underlying fundamentals warrant. And that could lead to some mean reversion over the next few years after two years of huge gains in the index.

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