History Says the S&P 500 Will Jump in 2026: 2 Magnificent Stocks to Buy Hand Over Fist Before They Skyrocket

AI demand is the primary growth driver for both Advanced Micro Devices and Alphabet, underpinning substantial 2025 share-price gains and setting the stage for continued earnings acceleration in 2026. AMD, up ~81% YTD, is winning data-center share with GPU and server CPU contracts (OpenAI, Microsoft, Oracle), forecasts data-center revenue CAGR above 60% over the next 3–5 years, saw client-processor revenue rise 46% YoY to $2.8bn, and analysts expect EPS of ~$6.44 next year (implying ~34% upside to a $296 target at sector-average multiples); Alphabet, up ~67% YTD, posted $102.3bn revenue (+16% YoY) and 35% earnings growth last quarter, is scaling AI features in Search (75m daily users) and Cloud (+34% YoY) with a $155bn cloud backlog (+46% sequentially) and partnerships/customer commitments for its custom chips, trading at ~29x forward earnings. While heavy near-term AI investments may temper margins, both companies are positioned to capture secular cloud and data-center AI spend, supporting upside for tech equities amid broader market forecasts that see AI infrastructure driving further S&P gains.

Analysis

Advanced Micro Devices has been a direct beneficiary of AI-driven data-center demand, with the stock up about 81% year-to-date versus the PHLX Semiconductor Sector’s 46% gain; AMD cites contracts with OpenAI, Microsoft and Oracle and expects data-center revenue to grow at an annual rate exceeding 60% over the next three-to-five years versus a 52% five-year past rate, while client-processor revenue rose 46% year-over-year to a record $2.8 billion and analysts forecast roughly $6.44 in EPS for next year. Trading at about 35 times forward earnings versus the U.S. tech sector’s 46x average and an implied $296 price target (roughly 34% upside if sector multiples re-rate), AMD’s momentum is supported by an expected 83% surge in AI PC shipments to 143 million units in 2026.

Alphabet has recorded roughly 67% YTD gains and reported $102.3 billion in revenue (+16% year-over-year) and 35% earnings growth in the most recent quarter; Google Search’s AI mode reached 75 million daily users and Google Cloud revenue rose 34% with a $155 billion cloud backlog that increased 46% sequentially. Alphabet is positioning as a full-stack AI provider with custom-chip commitments (Anthropic up to 1 million chips) and trades near 29x forward earnings, but the company warns heavy AI infrastructure investment may weigh on near-term performance even as longer-term growth is expected to accelerate.

Macro and market context are supportive: the S&P 500 bull market is three years old and HSBC projects AI infrastructure spending to be a primary driver of further upside; however, near-term risks include execution of large cloud/backlog conversions and margin pressure from AI capex, so investors should balance upside potential against these operational and timing risks.

Key Decisions for Investors

• Consider an overweight position in AMD on its >60% data-center revenue guidance, strong client-processor growth and analyst EPS of ~$6.44 implying ~34% upside, but size exposure incrementally pending confirmation of next-year revenue and margin trends
• Consider buying or adding to Alphabet on pullbacks given a 29x forward multiple, a $155 billion cloud backlog and clear AI product adoption (75m daily Search AI users), while accounting for potential near-term headwinds from heavy AI infrastructure spending
• Monitor leading indicators closely: AMD’s quarterly data-center revenue trajectory and 2026 AI PC shipment data, Alphabet’s cloud backlog conversion rates and sequential backlog growth, and announced large-scale chip deployments from customers
• Manage risk with staged entries or hedges because upside depends on execution and timing of AI-driven demand, and near-term margin or earnings pressure from AI investments could produce volatility