2 Top Nasdaq Stocks to Buy Before They Soar in 2026

Microsoft and AppLovin are highlighted as attractive growth stocks, with Microsoft's Azure revenue up 40%, AI ARR up 123%, and Microsoft 365 Copilot seats rising 250% to 20 million. AppLovin posted Q1 revenue growth of 59% to $1.84 billion and EBITDA growth of 66% to $1.56 billion, while also announcing a June self-service platform launch. The piece is constructive on both names, but it is primarily valuation and growth commentary rather than new material corporate news.

Analysis

The key market setup is not that these are simply “cheap growth” names; it’s that both are under-owned relative to their earnings power, which creates room for multiple expansion if execution stays clean. MSFT looks like a quality-duration trade: the market is discounting slower AI monetization, but the mix shift toward usage-based Copilot/GitHub and the large backlog of Azure commitments can convert into incremental margin without needing heroic top-line surprises. That makes the stock more sensitive to continued beat-and-raise behavior over the next 2-3 quarters than to any single AI headline.

APP is more of a catalyst stack than a valuation story. The self-service launch could broaden the buyer universe and reduce dependence on a narrow set of large gaming accounts, which is important because the next leg of upside likely comes from distribution, not just model improvement. The market may be underestimating how much operating leverage remains if that onboarding is smooth; however, the same setup means any product friction or take-rate pressure can de-rate the stock quickly because expectations are high and the multiple is still a growth multiple, not a value floor.

Second-order, the competitive pressure is likely to show up first in adjacencies: U and smaller adtech peers can see share loss if APP’s platform opens successfully, while Microsoft’s AI monetization will keep pressure on SaaS peers that are still struggling to prove real seat-level ROI. The contrarian view is that both names may be less “undervalued” than “less crowded,” and that matters: if rates stay stable and the market keeps rewarding durable growth, these can keep rerating; if the market rotates back toward cyclicals or evidence of AI monetization disappoints, their long-duration cash flows will get marked down fast.

Key Decisions for Investors

• Long MSFT on a 3-6 month horizon: favor call spreads over outright equity to express a rerating toward 24-25x FY27E if Azure/Copilot trends stay intact; risk is limited to multiple compression if AI monetization stalls.
• Long APP into the June self-service launch, but stage entry in two tranches: 50% now, 50% on confirmation that early adoption is not cannibalizing managed-service economics; upside is a fast re-rating if the platform opens a new TAM, downside is sharp if onboarding is clunky.
• Pair trade: long MSFT / short U as a relative-quality AI monetization trade; MSFT has more credible near-term pricing power and broader enterprise distribution, while U is more exposed if adtech share continues to consolidate toward scale players.
• If seeking higher convexity, buy APP January calls or a call spread and size small; the catalyst path is clearer over 1-2 quarters, but the stock can gap down hard on any growth deceleration or margin miss.
• Avoid chasing NVDA off this article alone; the read-through is indirect and the market is already heavily positioned for AI infrastructure spend, so risk/reward is weaker than the application-layer names here.